What did your crystal ball say this time last year? Transitory inflation was looking anything but transitory. “Recession” was probably the only word thrown around more than “inflation”. The Fed was still talking a tough game of not backing down from further rate hikes.
The S&P 500 just finished the prior year, 2022, down nearly 20% with the high-flying tech sector appearing vincible (actual antonym of invincible). Fixed income looked about as fixed as inflation did transitory, coming off its worst year on record as the aggregate U.S. bond market dropped 13%.
The first week of 2023 offered investors their fair share of worries. Yet, the markets are fickle, refusing to pay mind to your emotions, pleas, or concerns. As such, 2023 likely came as a pleasant surprise to most investors. Here’s a 2023 market recap.
The S&P 500 finished at 4,783, good enough for a 26% return and just shy of its record of 4,796 from January 3, 2022. The layperson might be even more surprised, considering COVID, global conflicts, and other recent turmoil, to learn that this was the fourth positive year in the past five for the S&P 500. The NASDAQ led the way finishing positive 44%.
Both of these major indexes were buoyed by just a handful of huge winners. What have come be known as the Magnificent Seven — Apple, Microsoft, Alphabet (Google), Amazon, Nvidia, Meta Platforms (Facebook), and Tesla all posted outsized returns. Nvidia was the cream of this crop gaining 234% on the year.
The only major asset class to not finish in the green in 2023 was commodities. Oil, measured by West Texas Intermediate (WTI), entered the year just over $80 per barrel and finished the year under $72 per barrel. Some might find it interesting that despite war in the Middle East and Russia’s invasion of Ukraine not slowing down, that the national average price of gasoline finished 2021 at $3.40 per gallon, 2022 at $3.32 per gallon, and 2023 at $3.25.
As for fixed income, bondholders returned to the modest gains they anticipate from such holdings. The U.S. Aggregate bond index that was hammered in 2022, finished 2023 positive 5.53%. Oddly enough, the 10-year U.S. Treasury began 2023 at 3.88%, rallied to almost 5% in October, and then fell to finish the year exactly as it started, at 3.88%.
If the markets told us anything in 2023, it’s that we can always expect the unexpected. There may not be a better conclusion to this recap than the investment disclosure following any such commentary—past results are not an indicator of future performance. I challenge you to take note of how you feel the first week of this year, 2024, and see how it measures up to reality this time next year.
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Bryan M. Kuderna is a Certified Financial Planner™ and the founder of Kuderna Financial Team, a New Jersey-based financial services firm. He is the host of The Kuderna Podcast and author of ,"WHAT SHOULD I DO WITH MY MONEY?: Economic Insights to Build Wealth Amid Chaos".