“Learn from yesterday, live for today, hope for tomorrow.” —Albert Einstein
Welcome to 2024! Before we discuss the year to come, let’s review the year that was. The markets in 2023 should be summarized with both relief and resentment. Starting off last January, many experts proclaimed to “expect a hard landing” and “a recession is inevitable” to anyone who would listen. I am glad they weren’t right. The recession never showed up and inflation continually decelerated throughout the year, preventing the hard landing. However, I am also a little annoyed because the consensus opinion drove many investors to the sidelines and as a result, they missed out on the impressive +24% in the S&P 500 index. One can only wonder how much better 2023 would have been if there wasn’t a record $6 trillion dollars sitting out.
For those who missed out, the silver lining in the run to safety was high interest rates. Despite houses and cars being less affordable in 2023, safe money investments like CDs/Money Market Funds/Treasury Bills/Fixed Annuities/Savings Accounts became extremely enticing as 4% to 5% yields were offered for much of the year.
So as Albert Einstein would ask, “What did we learn?” Recessions have never been easily predictable. They usually come when people LEAST expect them, not when it is consensus. The fact that nearly everyone on television had the same pessimist opinion should have planted contrarian thoughts in our minds. Yes, we all were still concussed after suffering through 2022’s tough market and fear was everywhere. But as Warren Buffet, who is thought to be one of the greatest investors of all-time, has famously said, “Be fearful when others are greedy and be greedy when others are fearful.”
Turning the page to 2024, is it time to be greedy or fearful?
Let’s first consider some of the positive, fundamental tailwinds that could push us to new highs by the end of the year:
- Falling inflation.
- The Federal Reserve is no longer raising rates/possible rate cuts on the horizon.
- Falling interest rates benefit consumers & corporations.
- Money flows returning from the sidelines, back into the markets = expanding market breadth
However, the stock market doesn’t move in a straight line and some turbulence will show up along the way, potentially very soon. For starters, this is an election year and historically, there is typically a seasonal drawdown in the Feb/March timeframe. No one knows exactly why, only that it occurs. Secondly, the market has gone parabolic since November so it wouldn’t be surprising if some consolidation occurred. Lastly, there are predictions out right now that March could be the first rate cut of the year. If rates don’t get cut, I could see markets throwing a temper tantrum, much like in 2023 with rate hikes. Once again, Federal Reserve meetings will be must-see tv.
Of course, all of this could be completely wrong as none of us really knows what’s going to happen. As always, we will continue to watch what happens and report back if any changes or adjustments are needed. Continue to focus on your long-term investment goals and remember, just as 2023 reminded us, the thought of trying to time the market is a fool’s game, whereas time in the market is and will always be, your greatest advantage.