Tracey A. Baker, CFP®, Brian T. Jones, CFP®, Kevin E. Donovan, CFA and, Parker G. Trasborg, CFP® discuss markets in 2023 and what we are looking towards in 2024.
Parker G. Trasborg:
Hi, my name is Parker Trasborg. I’m Senior Financial Advisor here with CJM Wealth Advisers, and today as always, I’ve got Kevin Donovan, our Portfolio Research Director and two special guests. We’ve got our President and another Adviser here, Tracey Baker and our Chairman and another Adviser, Brian Jones. Happy New Year everyone. Thank you for joining us and tuning into our first quarter update of 2024. So 2023 was a great year for stocks. The bonds ended up doing pretty decently as well. Brian in 60 seconds or less, what was your top story of last year in 2023?
Brian T. Jones:
Thanks, Parker. I think the big story for me was the absolutely monster rally we saw in Q4. Clients have to remember that when we sent out the 9/30 reports, the Bond Agg was negative at that particular point in time. And if you look at the Dow, it was only up just barely over zero at that point. And what ended up happening was October was a down month. Both stocks and bonds declined in the month of October, and then we got to November and both equity and bond markets just absolutely took off, and it was just a wonderful end of the year. You saw a lot of broadening in the markets with regards to a lot of the things that had lagged front half of the year. So we ended 2023 it was just a great year.
Parker G. Trasborg:
Thank you. So fourth quarter was pretty good. Kevin, what did the rest of the year look like for you?
Kevin E. Donovan:
Yeah, let me expand it a little bit on what the full year was like. Let’s throw a chart up and see what the market bill performance looks like. You can see those, the top line there is the S&P 500, and it was up 24% for the year. Now we’ve talked in previous videos and our marketing commentaries about how the S&P was really influenced by the magnificent seven tech stocks like Nvidia, Apple, Amazon, things that really benefited from the AI boom earlier in the year. And that kind of carried through to the outperformance of the S&P for the full year. We go a little further down the chart. You can see international stocks had a very good year up 15% for the year. They beat the Dow. And bonds ended up with a gain of about five and a half percent, not too bad for bonds.
Showing the next chart is the fourth quarter chart that Brian was talking about. And here you can really see some of the things that he was mentioning where the Dow led all indexes higher, that was up 12.5%. So that’s some of the broadening out of the market where other sectors besides technology did well, like Brian said. And you see the big increase in bonds during the quarter that were negative, but they went up almost 7% in the quarter.
And one of the main reasons for that is our next chart, which shows the 10-year yield for treasury bonds, and it was a very volatile year for the 10-year yield as the Fed increased interest rates in the first part of the year, then held them steady, and then right at the peak there, as you see towards the end of the year in late October is when the Fed had said that basically they were done raising rates for now and that they may actually cut rates. They see themselves cutting rates in 2024, and that’s when we saw the 10-year yield go down steeply and you saw bond prices rise dramatically and the stock market really take off. So that’s kind of the big story for the year is the yields. Fed raising interest rates didn’t declare victory against the war against inflation, but inflation came down dramatically to about 4% and it’s well on its way towards going down even further.
Parker G. Trasborg:
Yeah, hopefully we’ll hit our 2% target (on inflation) here and not too long. So 2023 again was a good year, volatile as we kind of made our way through the year. Tracey, what are your top stories? What are you thinking about for 2024?
Tracey A. Baker:
Yeah, 2024, we’re really hoping that it is going to continue that trend that we started kind of late October, November, December that the Fed waged war on inflation and they are going to continue the trend of no longer raising interest rates. Anybody that has been in my meetings, I’ve talked about rising inflation and the Fed trying to fight it with raising interest rates. They declare victory and they’re going to maybe even perhaps drop interest rates, which would be fabulous. I warned clients we didn’t really want to see them pull back on interest rates because for them to do that would mean that they saw weakness in the economy.
It may be that they just saw that the economy has survived this and that they had that soft landing that they were hoping for, and that would be good news for everybody. So we’re really hopeful for that. We’ve got an election year, which I know we’re all dreading our phone ringing off the hook, but we really think that’s going to be kind of a non-issue. So we’re really hopeful that 2024 is going to be a good year for all of us other than our phones ringing off the hook, and we’re going to have a good year in the markets, both in the stock and bond markets. So we’re really very hopeful for 2024.
Parker G. Trasborg:
Yeah, it does look like the Fed may have engineered us to the soft landing.
Tracey A. Baker:
Hope so.
Parker G. Trasborg:
Keep our fingers crossed. Kevin, do you have anything to add for the rest of this year?
Kevin E. Donovan:
Yeah, I want to just echo what Tracey said about bonds. Right now, bonds are paying good yield, good income on bonds right now. You remember from ’08 until 2022, bonds were at zero basically. Now we’re finally getting good income, and if the Fed does lower interest rates, we’re going to see price appreciation on those bonds. So we’re really optimistic about the bond market. Stocks always going to be volatile, much more volatile than bonds are. I would caution against the market consensus at the beginning of the year. You remember the last year our market consensus was we were going to be in a recession in 2023. What everyone is saying is going to happen now may not necessarily pan out. We don’t know. There could be a market surprise, but we are optimistic on the bond side and we’re optimistic long term.
Parker G. Trasborg:
Great. Great. Thank you. Thank you all for joining us. Try something new today. Thank you, Brian for having us here and Tracey for joining as well. Kevin, as always, it’s been a pleasure getting together with you. Again, Happy New Year to everyone. I hope you all have a healthy and happy 2024. And if you have any questions at all, feel free to reach out to your planner directly and we will see you next time. Thank you.
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