As always, I want to thank you for being such great clients and friends. A special shout out to those that have helped me raise new assets, for the new investments from existing clients and for referring friends and loved ones. Thank you.
Now, for a look at the markets.
It is February 2024, and another year is in the books. I am sorry to have missed the fourth quarter newsletter, but as sometime happens, life got in the way of things.
Last year’s rally was a very narrow one as a handful of stocks provided most of the gains in the larger market indexes. In addition, with all the worries in both the US and the world, the large gains in the S&P 500 and Nasdaq were a surprise to many.
Consider all these headwinds the markets encountered in 2023
- With inflation high The Federal Reserve (The Fed) raised interest rates (numerous times)
- The Fed engaged in Quantitative Tightening (QT)
- There was a widely predicted recession ready to hit at any moment. (It never happened.)
- Wars in Ukraine and Gaza
It’s still hard for many to believe that the S&P 500 booked a return of over 20% for 2023.
Despite all the worries, both the economy and the labor market remain strong. Earnings growth of companies, particularly those that are technology related, have held up better than most believed.
The current narrative is that The Fed will reduce rates in 2024 although there is a question as to when they will start and how many cuts we will get. This really doesn’t matter if the direction for rates is lower. In addition, The FED will slow down its Quantitative Tightening program.
The stock market has real reasons to rally as all these factors serve to ease financial conditions. Also, as rates come down and CD and money market rates are lower, there should be a lot of money in those vehicles that move into the stock market.
As long as the FED doesn’t hold rates too high for too long the economy should remain strong and corporate earnings should follow. The biggest risk right now is inflation coming back strong or the Fed holding rates too high for too long which causes the economy to shrink.
Neither seems likely.
So, what am I doing?
Many people are calling for a broadening of the markets, which would be healthy. Year to date that has not held up, but I have added some positions that should do well if indeed this becomes the case. Most of my clients’ portfolios are still in investments that did well last year as I still believe that their businesses, balance sheets and prospects are better than most others. But as the US dollar goes down and interest rates go lower due to The Fed’s actions, these newer investments should provide opportunities for client returns.
lf you are interested in speaking more about any of this, or have any other questions or concerns, please feel free to email me to schedule time to talk.
Thank you very much.
Jordan Kerner
Past performance is no guarantee of future results. Investing involves risk and the potential to lose principal.
The information provided, including references to market sectors, is for general informational and educational purposes only. No comments referenced herein should be construed as a recommendation of any kind or investment advice.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
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