We had no idea what the 2023 year-end market update would look like a year ago.
As it turns out, the year ended with US stocks up 26 percent, as measured by the US Total Stock Market index fund. The total bond market was up 6.8 percent. Inflation cooled in late 2023 to a 3.4 percent annual inflation rate – the Fed’s goal being a “slow and steady” two percent.
We didn’t see that coming – but fortunately, we didn’t try to.
Many others did though. “All across Wall Street … the mood was glum. It was the end of 2022 and everyone, it seemed, was game-planning for the recession they were convinced was coming.”
If you remember, the US Total Stock Market index fund was down 19.5% at the end of 2022. By and large, investors were indeed feeling pessimistic. Those who created new “game plans” based on feelings or guesses, however, may be regretting it.
According to “Everything Wall Street Got Wrong in 2023,” a recent article from Bloomberg News, the consensus view on Wall Street a year ago was to “sell US stocks, buy Treasuries, [and] buy Chinese stocks.” The consensus, however, was “dead wrong.”
At the end of 2023, stocks were up, the 10-year treasury yield was the same as it was a year ago, and Chinese stocks were down.
“’I’ve never seen the consensus as wrong as it was in 2023,’ said the chief investment strategist at Russell Investments,” the Bloomberg article reports.
One strategist from TD Securities admitted that “he and his colleagues ‘did some soul searching’ as the year wound down … ‘It’s important to learn from what you got wrong.’”
The reporter somewhat dryly notes: “What did he learn? That the economy is far stronger and far better positioned to cope with higher interest rates than he had thought. And yet, he remains convinced that a recession looms. It will hit in 2024, he says, and when it does, bonds will rally.”
The point here is not to gloat that investment strategists got it all wrong. After all: we didn’t see 2023 coming either.
The point is that nobody could have predicted how the markets would shake out in 2023 – and if they did, it was simply a lucky guess. And who’s to say that their next guess will be equally lucky in 2024?
With an appropriate asset allocation, there’s no need to make lucky guesses or new game plans based on market performance – regardless of whether you think a recession looms. Instead, a diversified, personalized portfolio is designed around your particular risk tolerance, time horizons, and goals.
But importantly: if any of those have changed, please don’t hesitate to reach out to your advisor for guidance. We’re here and always happy to fine-tune your portfolio.