Broker Check

Now What Happens . . .

January 03, 2024

Now What Happens. . . 

Standard Disclosure:  I have no earthly idea what is going to happen in 2024, but then again, neither does anyone else, and if I may be even more direct – I doesn’t matter what happens, because unless your long-term financial goals have been drastically altered in some meaningful way, what happens in 2024 will have absolutely NO bearing on whether you achieve your goals or fall short of them.   What will have EVERYTHING to do with your results will be your reaction to yet unknown events, in other words, your BEHAVIOR is what matters.  Now on with the commentary. . . 

2023 was a weird year.  It started out with so much hope for a great year, after 2022’s bear market, reached a low point the prior October.  You could say that investors were almost giddy with excitement about what potential laid in store for the equity markets. 

The Magnificent 7 were the Kings of 2023, until they weren’t (and no, I’m not talking about the Western movie starring Steve McQueen, Yul Brynner, Charles Bronson, and other notable actors) 

I’m referring to the Magnificent 7 of the S&P 500 Index - Microsoft, Apple, Google, Meta, Amazon, Nvidia, and Tesla.  Those combined companies at their high-water mark for the year would make up over 100% of the return of the return of the S&P 500 Index.  Which meant that the other 493 companies that made up the index did exactly bupkis. 

If you owned any combination of the Magnificent 7, chances are you felt darn good about your portfolio, and if you had the misfortune of not owning any of those, well then, you were sure to have felt pain and disappointment in your portfolio. 

Which meant that the other 493 companies of the S&P 500 Index (along with mid-caps, and small caps) were trying just to keep their noses above the water line.  To say that during the first six months of the year, that investors felt like their investments were slogging through a thick and muddy bog would be an understatement.  

Just when investors were feeling good about the Magnificent 7, it happened . . . 

The bottom fell out. 

The Magnificent 7 in the third quarter gave investors that sinking feeling of “Oh no! Here we go again”, as they saw the S&P index lose 10%.    

But wait! 

On October 27th, and for reasons that I do not know and that aren’t important, investors decided to invite the other 493 companies to the party, as well as their small and mid-cap brethren.   

So now what happens?  

If 2023 was such a bumpy ride, then what’s going to happen in 2024? 

See my previous disclosure. 

I can, however, give you dear reader my best educated guess as to how things will shape up for 2024, in the most generic and non-committal way possible. 

Here are my guesses for 2024: 

  1. Whatever happens, you will not see it coming, more importantly, nor will anyone else – Just like in 2020 when absolutely NO ONE saw COVID-19 coming, much less predict how the world governments would react by enforcing massive shutdowns. Just like in 2021, when inflation ran rampant – I don’t remember that being a headline prediction on any magazine cover.  Just like in 2022, when the Fed began hiking interest rates at the fastest rate in recorded history!  Just like in 2023 when the Magnificent 7 ruled the equity markets.  None of these events were predicted. 
  1. Some so called “expert” will predict a recession – Just like the predictions of recession in 2020, when COVID hit. Or how about in 2021, when inflation hit the economy, or in 2022 when the Fed started hiking, and in 2023 when the Fed continued hiking.  All of these events were supposed to lead to a recession.  These prognosticating knuckleheads have to be right eventually, don’t they? 
  1. Someone will predict a “Bear Market” to strike in 2024 – Every year and in every crowd there’s a Debbie Downer. 2024 will be no different.   
  1. The calls for a Fed pivot will get worse – Already there are investors who are thinking (and betting) that the Fed will pivot and start to decrease interest rates. Kick and scream all you want about lowering interest rates, but unfortunately, inflation will be the deciding factor as to if and when and at what pace that interest rates get cut.  
  1. Volatility will once again be part of the landscape – It happens EVERY year, and 2024 will be no different. Your investment gains haven’t ever been, nor will they ever be, linear.  Volatility is the price you pay for the superior long-term returns that are necessary for you to reach your goals. 
  1. Plan on the plan not going according to the plan – probably the most prophetic prediction I could ever make. This yearly prediction of mine has been right every single year of my life.  

My point in that, I get the reason for predictions.  Corporations, governments, and even households, build budgets which are based on what may happen in the new year.  Like it or not, predictions are an integral part of finance.  

However, my caution is that while predictions can sometimes be useful, it’s important to understand that life often gets in the way of your expectations.  Surprises occur more often than anyone could imagine.  

No one knows what will happen, just don’t be surprised when you’re surprised when it does happen! 

I wish you a Happy, Blessed, Successful, Health and Peaceful New Year! 

Stay the course, my friends!