By Suzanne Hazlett, MBA, CIMA®, CFP®
The S&P 500 Stock Index reversed its 2022 losses and then some, closing the year near a record high. The market environment looked a lot brighter at the tail end of 2023 than it did at the close of a dreary 2022. However, it is important to put the positive year of performance into perspective: 2023 was a reset year, as the over 25% return for the S&P 500 only recouped all the losses from 2022.
Tech-related sectors were the best performers for the year, as the NASDAQ 100 and its leading artificial intelligence stocks saw their best year since the 1999 tech bubble. Small-cap equities, a significant underperformer for the year, showed signs of a resurgence as they were the best performer in the fourth quarter.
Still, celebrating the Fed engineering a “soft landing” may be too soon. For one, inflation remains above the 2.0% target. Two, the lagging effects of its rate hike program continue to cool economic activity. And three, the repercussions of higher economic growth or any other geopolitical event with the potential to disrupt food and energy prices could directly influence inflation and shape future Fed policy.
But even a conservative reading of the Fed’s messaging suggests interest rate cuts to come in 2024. That said, the Fed has demonstrated its commitment to calming inflationary pressures, and they are turning their attention to the economy, where there are more and more signs of the economy slowing. Sluggish economic growth and the potential for investor sentiment to suddenly shift are potential risks, as is the possibility of a recession.
Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the author’s judgment and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change.
Suzanne Hazlett, MBA, CIMA®, CFP®, is a Certified Investment Management Analyst® and CERTIFIED FINANCIAL PLANNERTM professional. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities are offered through Raymond James Financial Services, Inc., member FINRA/SIPC. HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. 675 Sun Valley Road, Suite J1 + J2, Ketchum, Idaho, 83340 208.726.0605 HazlettWealthManagement.com