2023 ended with a bang in the market and frankly took many by surprise at how resilient the market and economy turned out to be. Heading into the last year inflation, recession, declining earnings, and geopolitical events dominated the headlines. Articles predicted that 2023 was going to be similar to 2022 and the Federal Reserve would continue to make substantial rate hikes. When in the end, the Federal Reserve did about half of the rate hikes they made in 2022.
https://www.forbes.com/advisor/investing/fed-funds-rate-history/
January 2022 reported CPI of 7.5% and by the end of 2023 CPI was reporting 3.4%, closer to the Federal Reserve target of 2% annualized inflation and the stock markets all posted double digit returns. In the end, 2022 was nothing like 2023.
Its futile to predict where 2024 will be in the markets, but we know that’s what everyone tries to do. We fully expect markets to be up in 2024, because if we didn’t, we would tell you to sell all of your stocks, and that would be irresponsible for the long-term investor. With that said, here are a few things we like and don’t like about 2024.
What we like:
- Inflation has declined quickly coming off COVID and we think that a CPI under 4% will allow prices and interest rates to stabilize in a way the consumer can prepare for and manage. The uncertainty here is does it stay this low for the time being.
- Consumers are still holding cash and in general their personal balance sheets are in strong financial positions. https://www.forbes.com/sites/seanhanlon-1/2023/10/20/us-households-balance-sheets-are-strong-but-what-about-the-governments/?sh=bfab26b150dd
- With 4Q23 earning reporting soon, 3Q23 earnings for S&P 500 companies reported significant growth, surpassing many expectations for the year. https://www.spglobal.com/marketintelligence/en/news-insights/blog/sp-500-q3-2023-sector-earnings-revenue-data
What we are concerned about:
- For 2023 net interest costs were over $659B up 39% over the previous year and doubled from fiscal 2022. This could lead to a lag on the economic environment.
https://www.cnn.com/2023/11/16/politics/interest-payments-federal-government-debt/index.html
- Geopolitical events continue to dominate national headlines as the war in Ukraine and Israel do not seem to have an end in sight. The big concern is do either of these wars spread to other parts of Eastern Europe or the Middle East.
- The US Debt, which currently sits at $34 Trillion is becoming alarming, it is at all-time high and doesn’t seem to be trending a different direction at all. However, the debt to GDP is not at an all-time high and currently sits at about 120%, the high touched 132%. So, while the debt is something we are concerned with and we pay attention to the US debt rating, it’s a long-term trend that is well known.
At the end of the day, the major risks of the market are the unknowns, think, COVID shutdown and bank defaults. These are the scenarios that you cannot plan for and shake an investors behavioral mindset from the long term to the short term. (Meaning making long term investment changes due to a short-term event).
The risks are known can be planned for and are typically priced into the market.
BVB Group Team Updates
Our team has been proudly listed as one of FORBES/SHOOK Best in State Wealth Management Teams for 2024. While several of the advisors have been listed individually, we are truly grateful for the collective recognition for our whole team. Every day we strive to provide our clients with the financial peace of mind knowing that you have a team always looking out for your best interest and exceeding your expectations. Read more here: Forbes- wealth-management-teams-best-in-state
Published on January 9, 2024. Rankings based on data as of March 31, 2023
At the beginning of the year, we are thrilled to welcome Rachel Lazewski back from maternity leave and as a result we have a few changes to the group. Jaci Barker has a new opportunity outside of Baird and will be taking on her new role at the end of the month. Her last day at Baird is January 17th and we wish her the best in her new opportunity. This means the additional support we had while Rachel was on maternity leave, Danny von Estorff, has the opportunity to stay with BVB Group as a full-time team member, please join us in welcoming him, we are very excited to have him join our team!
Tax Mailing Updates
You should have received an email or flyer in your recent statements detailing the 2023 Tax Form mailing schedule. While we think most clients should have everything they need by the end of February, some forms may be delayed. Below:
Please note that all documents will be posted online and maybe eligible for download to TurboTax and a CSV file.
JG2024-0118