2023 Year In Review
2023 was an interesting follow up to 2022.
The Magnificent 7 (the stocks, not the movie) include Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), Apple, (AAPL), Alphabet (GOOG, GOOGL), Nvidia (NVDA), and Tesla (TSLA). The term, coined by BofA analyst Michael Hartnett, describes those seven companies who are deemed to be capitalizing on tech growth trends such as AI, cloud computing, and cutting-edge hardware and software. And for the last few years, they have dominated market returns.
Influence
How influential have these companies been in driving overall returns? In 2023, those seven companies had an average return of 111%, compared to 26% for the S&P 500 and 54% for the NASDAQ 100. In 2022, those companies were down an average of 70%, compared to -18% for the S&P 500 and -33% for the NASDAQ 100. Why do these percentages matter? These seven companies comprise more than 25% of the S&P 500 and more than half the NASDAQ 100.
Public Markets
We have written elsewhere about 2022 results. Looking just at 2023, we see that municipal bonds were up 5% to 8% while corporate bonds were up 5% to 11%, both depending on which specific index is being evaluated. The winning sector in corporate bonds was Communication Services, with bonds in that sector up 44%.
On the stock front, the FTSE All-World Index was up 22% while the S&P 500 was up 26% and the NASDAQ 100 was up 54%. The winner in stocks was the Information Technology sector, up almost 53%. If you enjoy studying this sort of thing, do a search for Vanguard Benchmark Returns. It is updated monthly and has more information than most care to explore.
Looking Forward
We will leave to others, projections about where stock and bond indices will finish the year. What could influence the year’s outcomes? Continuing sanctions against Russia, as well as other countries deemed aggressors, could impede access to critical goods and materials provided by those countries. This has the potential to increase prices. Grains, oil, metals, and rare earth minerals are some of the goods whose availability and prices could be impacted.
With war and aggression in the Middle East, shipping costs and times are increasing, as shippers avoid these shipping lanes. This in turn has the potential to impact cost and availability of many goods around the world and create spikes in the price of oil.
2024 is a presidential election year in the U.S., Canada, Brazil, Mexico, Venezuela, India, Iran, South Korea, Tiawan, the European Parliament, Britain, Australia, and many other countries around the world. Regime change is expected in many countries. These changes can impact stability both within and outside of those countries, causing both social and economic turmoil.
What Am I Doing?
Personally, I’m doing just a few things. Building cash reserves. Buying individual dividend-paying stocks. Being attentive to serving clients and team members well so our business continues to be healthy. Studying how best to acquire investment real estate. Avoiding debt. Nothing especially exciting. Simply the basic blocking and tackling of money and finance. Or the core habits which we embrace and teach, as we have found these to be the things we can control. And those habits that, over time, build a strong, healthy, diversified, tax-effective financial statement. And enable each of us to enjoy time freedom.
Until we see you again, wishing you only the best.