Market Up in 2023, but Choppy Waters Ahead

On this episode of A Wiser Retirement™ Podcast, Casey Smith and Andrew Pratt, CFA, talk about market performance in 2023 and discuss the potential for choppy waters ahead. They also delve into market expectations, the comparison between growth and value investments, bond performance, and provide insights into the market’s future direction. They will educate you on the significance of asset allocation and diversification within portfolios, offering actionable steps for effectively managing risk exposure.

Listen on Apple Podcasts or watch on YouTube:

SUMMARY:

2023 Market Performance

2023 was expected to be a year of doom and destruction in the market. All the predictions for this year were bleak. There was a lot of AI hype, which drove up market expectations and earnings growth projections. Strong GDP growth and a robust labor market played a significant role in the market’s great performance in 2023. Year to date, the S&P 500 is currently up a little over 17%, compared to being down 18% last year.

Growth vs Value

Another thing we look at is growth vs value. Value stocks tend to pay higher dividends, typically can’t grow their market share, and can be managed better. A growth stock is something like Apple or Pepsi. People thought value was going to make a comeback from 2022 into 2023, but that hasn’t happened at all. Growth has outperformed value by 24% YTD.

Bonds

For conservative investors in 2022, the bond market was hard. Interest rates rose faster than ever in history. Year to date, bonds have performed slightly positive. This isn’t stellar, but it’s better than being down. The main thing to remember about bonds is that they are mainly for diversification and protection of the portfolio.

Concerns About Where the Market is Headed

One of the concerns in the market right now is the inverted yield curve. This is when the short term yield is higher than the long term yield. It has almost been inverted for a year now. The short term interest rate is supposed to be lower than the long term interest rate, but right now it’s flipped.

Another concern has to do with the index that looks at leading economic data, which is the leading economic indicators. This is put out by the conference board and they look at 10 different leading variables. That leading index has declined 16 months in a row.

What actions should investors take now?

At the end of the day, it’s important to keep in mind that your focus should be on the long-term. Stay invested and don’t get caught up on trying to time the market. When we take clients through our financial planning process and look at probabilities of success, every one of those probabilities includes repeating the great financial crisis. By having a plan in place like this, our clients are prepared no matter how the market ends up performing.

Download our eBook: “Buyer Beware: Why do they keep trying to sell you that annuity?”

TIMESTAMPS:

0:00 Intro

02:05 Market Performance and Investment Trends

16:33 Investor Concerns in Slow Growth Market

LINKS:

Learn more about Casey Smith and Andrew Pratt, CFA.

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Learn more about A Wiser Retirement™ podcast and access previous episodes.

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