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Market Update 1/2/24



The New Year


Happy New Year to all the Warcap family and friends!! 2023 is in the books and the markets surprised many. Numerous investors entered the year concerned about the stock market after a 20% decline in the S&P 500 in 2022. But the market surprises many and last year was no different as the S&P 500 notched a total return of 24%, more than double the long-term average. Fixed income trailed dramatically with the aggregate bond index up 3.1% for last year. We remained heavily weighted to equities last year and began to add short-term fixed income in the second half, both of which worked out well for our clients.  But the fourth quarter brought some significant developments. 

 

The year ended with a huge bond market rally following Fed Chairman Powell’s dovish inflation tone. That tone proved correct as CPI is now tracking below 2% and the markets are sniffing for any sign of deflation. The macro trend to watch will be inflation for Q1 as both the stock and bond market are now pricing in rate cuts for 2024. I haven’t yet adopted that stance as rate cuts would likely accompany a recession and the economy is too strong right now to assume such. In just one year the pendulum has swung from extremely bearish to bullish and I suspect the masses are going to be wrong yet again. Slow and steady will likely be the tone for 2024 and we are allocated accordingly.

 

It’s a new year, we’re all back to work and it’s time to get after it.  Let’s all strive to make 2024 our best year yet!

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