The
Financial
Quarterly
Quarter 4 2023
After a rocky year, stocks rallied in Q4 to end 2023 with a bang.1
Can we trust the bull market? Is a correction hiding around the corner? Will that predicted recession finally strike?
We'll dive into what happened in the final months of 2023 and what we might see in the first months of 2024.
Looking Back
How Did Markets Perform Last Year?
S&P 500
24.2%
The broader U.S. market gained significantly, nearly reaching a new high.1
NASDAQ
43.4%
The tech-focused NASDAQ soared in 2023 on AI and other tech trends.1
DOW 30
13.7%
The blue-chip Dow also rose with the overall market despite bumps along the way.1
Looking Ahead
What factors may influence markets in the months to come?
Let’s take a look at some of the factors that we’ll be watching in the months ahead.
Interest Rates
The Federal Reserve has signaled that lower rates may be coming in 2024.2 If so, markets may continue rallying. However, any hints of further hikes will likely result in a return to negativity.
Economic Data
Economists expect slower economic growth this year.3 These lowered expectations may be "priced in" by investors. However, negative surprises may stoke volatility or trigger a correction.
Recession Indicators
The U.S. avoided a recession in 2023, but headwinds from high interest rates and global troubles remain. A mild recession is still possible and we'll be watching the data carefully.4
U.S. Politics
The 2024 election season may inject uncertainty into markets. However, despite overblown headlines, markets typically shrug off election ambiguity quickly.5
"Markets soared in Q4 but Q1 may bring bumps."
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Bottom Line
Key Takeaways for Savvy Investors
What conclusions should we draw from how 2023 ended? What lies ahead?
Investors are gaining confidence in the economy.
Though worries dogged markets throughout the latter half of 2023, investors are finally believing the worst may be behind us.
There is plenty to be optimistic about. Inflation has cooled, the economy is still growing, and the labor market continues to show strength.6
A few challenges lie ahead of us.
While high inflation seems to be behind us, we're still grappling with the full impact of prolonged high interest rates.
Economists predict slowing growth and some believe a recession may still be possible.4
We'll be watching consumer spending, labor market, and other data closely for clues of what might lie ahead.
Since markets tend to reflect the economy over the medium- and long-term, we expect economic concerns to have a strong influence on market trends.
We also expect domestic politics and international geopolitical issues to inject uncertainty into markets this year.
In the short-term, investor psychology is a major driver and can even overwhelm fundamentals of profitability and business value.
Will we see a recession in 2024?
Historically, recessions have nearly always followed Federal Reserve tightening monetary policy.4 However, we might dodge one this time and stick the "soft landing" policymakers have been chasing for years.
Plenty of economists believe that the risk of a recession is low.
Others see red flags and think that a mild recession could still be on the way.
We’ll just have to wait and see.
Bottom line: we’re watching the data, staying flexible, and looking for opportunities in Q1.
Questions about markets or your portfolio? Please reach out. I'd be happy to chat.
Sources:
1. https://www.cnbc.com/2023/12/28/stock-market-today-live-updates.html
2. https://www.cnbc.com/2024/01/03/the-fed-could-cut-interest-rates-in-2024-how-investors-can-prepare.html
3. https://www.jpmorgan.com/insights/outlook/economic-outlook/economic-trends
4. https://www.cnbc.com/2023/12/26/the-us-avoided-a-recession-in-2023-whats-the-outlook-for-2024.html
5. https://www.jpmorgan.com/insights/outlook/market-outlook/2024-elections-3-thoughts-on-the-year-ahead
6. https://www.cnn.com/2024/01/01/business/5-reasons-to-be-optimistic-about-the-2024-economy/index.html
Chart Sources
https://www.cnbc.com/2023/03/10/silicon-valley-bank-collapse-how-it-happened.html
https://www.cnn.com/2023/10/31/investing/premarket-stocks-october-markets/index.html
https://apnews.com/article/stock-market-rates-treasury-oil-14fd26900d055e4106a594be8920978c
The S&P 500 is a stock index considered to be representative of the U.S. stock market in general. The NASDAQ Composite Index is an unmanaged composite index of over 2,500 common equities listed on the NASDAQ stock exchange. The Dow Jones Industrial Average is a price-weighted index that tracks 30 large, publicly traded American companies.
All index returns exclude reinvested dividends and interest. Indices are unmanaged and cannot be invested into directly.
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Kevin Murray
Murray Financial Services
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