US Economy Ends Well, Now on to 2024

As we reported, for most of last year, we had anticipated the US stock market to recover from its selloff that began on July 28. The media speculated that the selloff was ending a short-lived rally and entering a bear market downtrend. The decline did eventually give up 50% of the year’s gain by October 27. However, as we projected in several of our Weekly Briefs, the selloff was not the beginning of a new bear market. In fact, the stock market bottomed in late October and not only recovered from the previous month’s decline but resumed its rally to new all-time record highs. Our expectations of a stock market yearend rally were modest due to waning retail sales and consumer confidence reported in October. As it turned out, the yearend rally exceeded our and most expectations as institutional investors added stocks to their portfolios that rallied the S&P 500 by 17% and NASDAQ by 23% since the bottom on October 27.

This was good news for our model portfolios and for those who followed our advice to stay invested or add to stock positions. We maintained our favorable view of the US economy and stock market all year and did not express concerns about the downward trend that began in July that could erase all the gains in the indices as several analysts had predicted. Contrary to the recession forecasts, during the third quarter, the US economy had its best-annualized growth in decades. Most importantly, consumers exceeded expectations in spending, retailers reported robust holiday sales, and the major indices ended with solid gains for the year.  

Below is an outline of the 2023 index returns:

• S&P 500: 24.23%

• DJIA: 13.70%

• NASDAQ: 43.23%

• Mid Cap S&P 400: 14.45%

• Small Cap S&P 600: 13.89%

Of these major indices, NASDAQ continued its torrid pace driven by the remarkable rally. Even though these indices rallied strongly in the last 93 days, NASDAQ was the top performer by rising 23% during this period, with its years’ gain almost 100% better than the S&P 500.

However, the bigger story is the huge rally of the Magnificent Seven that consists of Amazon (AMZN), Apple (AAPL), Google Parent (GOOGL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA). These seven stocks, at several points in 2023, represented the majority of the S&P 500 gain.  

Below is a chart of the 2023 total share price gains of these stocks:

Magnificent Seven Stock Performance

WHAT DOES IT MEAN TO ME?

We maintained our favorable view of the US economy and stock market during all of 2023. Our view is not changing for 2024. We anticipate another year of modest gains in the major indices, and dips will be new buying opportunities. The S&P 400 (mid-cap) and S&P 600 (small-cap) indices significantly trailed in returns to the S&P 500 and NASDAQ in 2023 and may outperform in 2024. We will keep you posted on these and other buying opportunities in 2024.

Let us know your thoughts about this Weekly Brief. More importantly, let us know how we can assist you with your financial and investment planning this year. We look forward to speaking with you.