Market Update January 2024
Discussion Summary
Stock and bond markets performed well during the 4th quarter, returning 8-12% for stocks and 5-6% for bonds.
For 2023 broadly, a few large companies (“magnificent seven”) generated an outsized amount of the overall results. This low breadth was unusual.
Short term interest rates appear to have peaked during 2023 and have since declined. We observe that after peak short-term interest rates for a given cycle, intermediate term bonds, historically, tend to outperform moving forward, despite having a lower starting yield.
Inflation has been declining in terms of year-over-year changes. Recent declines in energy prices have helped inflation come down.
On average, consumer finances are in relatively good shape. Over the past 10 years, household assets have been rising faster than liabilities and household debt service ratios (household’s ability to pay debts) are more favorable than average. This is in part due to the low interest rate environment for much of the past the 10 years.
We find a low correlation between election years and stock market results. In any given year, historically, the stock market has produced a positive return 73% of the time.
Time in and timing the market. Attempting to time the market can be costly from an opportunity cost perspective. Missing just the ten best days of the past twenty years would have resulted in annual returns dropping from 9.7% to just 5.5%.
Rather than timing the market, we advocate for matching near-term needs with high-quality short-term investments–while using long-term investable dollars to position for growth opportunities and outpace inflation.
The timestamps and chapters listed below mark specific sections for easy access to topics.
Times and Topics
(minutes : seconds ... chapters)
00:10 ... Put me in Coach
01:23 … Market Update
02:00 … Q4 Performance
04:06 … Magnificent 7 & Breadth
07:47 … Interest Rates
13:45 … After High Rates
16:35 … Inflation & CPI
21:54 … Consumer Balance Sheet
30:09 … Election Years & Returns
33:47 … Time in the Market vs Timing Markets
35:19 … Levers & Outlook
38:57 … Regulatory Information
V24019089
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