Happy New Year! WOW, what a year it has been. I really don’t think anyone expected to see or could have anticipated the type of market performance we witnessed to close out 2023. After coming off a dreary 2022, economists were widely anticipating a recession of some type as the Federal Reserve started to navigate the inflationary and interest rate driven economy. Reflecting now, there is no way we could have anticipated just how resilient consumer spending, and how the ensuing economic adjustments, were going to take shape. Think about this for a minute: the Federal Reserve increased interest rates at the fastest pace seen since the 1980’s, a regional banking crisis emerged, and war broke out in the Middle East. Yet, through all of this, the S&P 500 continued to climb, closing out the year just shy of the January 2022 all-time highs. We certainly witnessed a lot of highs and lows throughout the year but have come through a lot of the turmoil in a slightly better place. This is in no way meant to take lightly the bite that our wallets have faced, just the opposite actually. We (consumers) have simply found ways to adjust to the rising costs around us. If there is one thing we are, and have been known for, that is resiliency.
I have mentioned this a few times over the last few weeks, but I do want to reiterate that we are likely “over extended” right now in our financial markets. At least in the near-term. Given the move higher we have seen over the last 6 weeks or so, it would be normal to see some giveback in prices. I would view this as a likely buying opportunity, especially given the amount of cash that is sitting on the sidelines right now. With all the interest rate increases over the last year, yields in money markets, short-duration bonds and treasuries have been a very attractive option. At some point, a significant portion of those dollars will likely come off the sidelines and be deployed back into equities or other attractive areas of the stock market. Our U.S. markets have long been the place to be, especially with recent moves in technology and mega cap growth companies. This could change as we move into 2024 with areas like healthcare, small-cap companies and even financials seeming more attractive in the current environment.
So, what lies ahead in the New Year? The headlines will likely be dominated by the upcoming Presidential election, especially as the primaries begin to take shape. There is no doubt that a LOT of attention will be focused on how these next few months play out from a political standpoint. Beyond that, there is still some talk of an impending recession (mild if at all), and perhaps the biggest news will be not if, but when the Fed begins to cut rates. There is already a lot of speculation on the timing of any cuts with some predicting them to come as soon as the end of the first quarter. This will all be predicated upon the still moving lower inflation data, the state of the unemployment rate, and as always, consumer spending patterns. These are all things we will be watching closely. The housing market continues to confuse many for several reasons. The lack of much needed inventory will persist throughout 2024, in my opinion. Recent data is showing us that lower rates (the 30-year mortgage has moved lower from around 8% to below 7% in recent weeks), will likely keep prices elevated. As interest rates moved higher throughout 2022/2023, building slowed as consumers and homebuilders took a pause to assess things. This will only exacerbate the inventory issue for some time in my view. To sum it all up, we are likely to stay very busy in 2024!
Our team here at Mosaic remains grateful to work with all of our wonderful clients. We are fortunate to have the opportunity to serve you and your financial needs. As we reflect on the lessons learned from 2023 and look forward to what lies ahead in 2024, we are hopeful and optimistic for another good year in our financial markets. As always, we stand ready to adjust as needed in the coming year. Many of you have heard me use the analogy of being the “guard rails along the highway” keeping you as centered on the road as possible. Steven came up with a better analogy. We are actually more like Waze, pivoting and adjusting the route as needed for the “traffic” ahead. Still on the road to our destination, but perhaps a different path or detour is needed along the way. I like the thought of that.
Stay safe and enjoy your New Year!
Christopher E. Wasson, CFP®
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Mosaic Asset Partners, LLC is not affiliated with Kestra IS or Kestra AS. Investor Disclosures: https://www.kestrafinancial.com/disclosures
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.