JUSTIN’S MARKET MUSINGS | Thoughts to wrap up the Year | DECEMBER 20, 2023

All I can say is “what a difference a year makes!” I want to keep this post fairly light (it is the Holiday season after all), but there are some great take-aways from 2023 that are worth noting. Here are a few observations (on markets and the economy in general) and some commentary on each:

  • The “crowd” is usually wrong: I can tell you that by virtually every measure, the average investor and the “Pro’s” alike were bearish/negative on the markets and the economy. In fact, they were some of the most extreme negative views we have in documented history. Oops!
  • Btw, beware of the crowd getting too excited here at the end of the year.
  • Markets are a discounting mechanism. In other words, markets attempt to reflect what conditions will be in 6-12 months. This makes is very confusing for Advisors and Investors, as a “bad” market (see end of 2022) can be made to feel worse when “bad” economic data gets reported by companies and the government. In reality, current data has likely already been priced into the market. And, when the market starts to perform well, while data remains soft, the tendency is to suggest the market is wrong. Yogi Berra said it the best: “Its tough to make predictions, especially about the future.”
  • No one, and I mean NO ONE can time the market. Market participants will forever try to outsmart asset markets, and they may get it right on rare occasion, but you can bet they will be wrong the next time. A lot of money managers, Advisors and Investors were very negative back in the Fall, and rightfully so. Things felt awful. But, we’ve had one of the best market runs in the last 2 months that we’ve seen in a while.
  • Remember, markets go up over time, just not all the time.
  • Investing based on “gut” or emotions is the worst guide. We all do it. Its human nature. But emotions tend to keep investors out of the markets when they are down (buy low, right?) and investing more in markets when they are up (sell high, right?). Of course, we know that “buy low, sell high” is the goal, but emotions rarely suggests that is the right thing to do.
  • Stick with the plan. If you have a long-term plan, revisit it during tough times and good times. If it needs to be adjusted based off of life-changes, then do it. Don’t adjust it based on the market conditions.

Of course, I get asked a lot about my expectations for 2024, and while I just said that no one can predict the future, here are my thoughts for next year:

  • The economy is normalizing. This is a good thing. Unfortunately, “normal” means slow growth in the US. You can thank our spend-thrift Federal Government for that. But, slow and steady is ok. The Covid pandemic, and the ultimate fiscal/monetary responses, created artificial market conditions that are finally working their way out of the economy. It has made for some confusing and even unprecedented reactions. But, again, that seems to be mostly behind us. So, low inflation and slow growth will likely take hold in 2024. That’s ok. Markets can deal with anything, as long as there are no major surprises. So, barring a resurgence in inflation (see 1970s) which would unfortunately require the Fed to keep rates “higher for longer,” I’d expect markets to edge higher again in 2024, but at a slower rate than 2023. Remember, markets have just now reached the same level we were at 2 years ago. We are hardly over-priced, unless we fall into a recession in 2024. And, while that is a possibility, recent data suggests the likelihood of that has lessened (which is why markets have rallied so much of late). Of course, the next 12 months will throw us some surprises, so stay tuned. But, let’s hope for continued success in 2024 and beyond.

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Happy Holidays, Merry Christmas and Happy New Year!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Tracking #519336-1