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Q4/2023 Market Review


Magnificent Market


January 19, 2024

Dear M. David,


  • All systems go!
  • Markets post “Magnificent” rebound.
  • Central Bank pauses.
  • Bond yields reverse course.

Rebounding from widespread losses in 2022, broad stock and bond measures rose across the board in 2023. Stocks surged in the fourth quarter, with the Dow Jones Industrial average, Standard & Poor's 500-stock index, and the NASDAQ Composite index closing the year with a nine-week winning streak. It was the longest consecutive weekly advance for the S&P 500 since 2004.

 

Stocks posted double-digit fourth-quarter gains, with the Dow Jones climbing 12.5%, the S&P 500 (total return) adding 11.7%, and the NASDAQ tacking on 13.6%. Returns for all of 2023 were significant, with the Dow Jones increasing 13.7%, the S&P 500 (total return) swelling 26.3%, and the NASDAQ skyrocketing 43.4%.


Returns in 2023, especially the NASDAQ, were largely driven by what has become known as the “Magnificent 7” technology and internet companies that comprise nearly 30% of the market capitalization of the S&P 500: Apple (up 48.2% for 2023), Microsoft (56.8%), Amazon (80.9%), Nvidia (238.9%), Google parent Alphabet (58.3%), Meta/Facebook (194.1%), and Tesla (101.7%). 

 

After raising short-term interest rates four times in 2023, for a total of 1.0% through July, the Federal Reserve met twice during the fourth quarter, leaving rates unchanged.  The Fed hiked its short-term lending rate from near zero beginning in March 2022 to the current range of 5.25% to 5.50%.

 

Long-term U.S. Treasury yields ticked up to levels not seen since before the 2008 Financial Crisis, hovering around 5.0% in October. With expectations for lower interest rates at some point in 2024, intermediate- and long-term yields reversed course and ended nearly where they started 2023. One-, two-, five-, 10-, and 30-year Treasury securities ended the year at 4.78%, 4.25%, 3.84%, 3.87%, and 4.02%, respectively, with no more than a 15 basis point change from the outset of 2023. 

 

Consistent with the uptick in Treasury yields, the average rate for 30-year fixed-rate mortgages, as reported by Freddie Mac, rose to a high of 7.79% in October, a level not seen in more than 20 years. The average mortgage rate declined to 6.61% by year end.

 

After mixed results for most the year, the fourth-quarter retreat in yields led bond indexes to close 2023 in positive territory. For the year, broad bond measures advanced by mid single-digits.


Below are rates of return for selected market indices for the fourth quarter of 2023, full-year 2023, and the three, five, and 10-year compound annual returns as of December 31, 2023.

Please feel free to forward this email to friends and colleagues who can benefit from information about investing and financial planning. As always, if I can be of any assistance to you or anyone you know, please do not hesitate to contact me. It would be my privilege to assist with your investment and financial planning needs. For more information, please see our website at www.kaloramawealth.com.

Sincerely, 

M. David Goldstein CFA, CFP® 
CEO and Chief Investment Officer 
Kalorama Wealth Strategies, LLC 
202-550-7262
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