For those of you who would prefer to listen:
What an eventful year. 2023 sure has been a banner year for investors. It definitely didn’t start out that way. Remember the banking crisis and the takedowns of Silicon Valley Bank and First Republic in the Spring? That seems like forever ago.
In so many ways, the Market rallied in the face of pain, uncertainty and a whole lot of risk. Who would’ve thought the price of Oil would sink after a horrific attack followed by war in the Middle East? It did. The Market has a way of fighting through crisis and confusion, constantly anticipating events and instantly pricing them in. It’s forward-looking. The Market is practical yet cynical. It focuses on facts and is primarily driven by revenues and earnings. The Market has what nothing else does: The Wisdom of Crowds the world over. It matches buyers with sellers in order to discover true and fair price. The Market is us. It’s a pretty remarkable thing to be a part of.
The 2023 Market rally was driven by a combination of Artificial Intelligence and the Fed. The Tech Titans took the wheel. Their stocks left the others in the dust.
The AI revolution kicked into high gear when Microsoft made a massive investment in the San Francisco start-up OpenAI. Its cutting-edge program ChatGPT hit the public. It generated 100 Million subscribers in just 2 months. That is lightning fast for customer adoption. For comparison, it took Instagram 2 years to get 100 Million users. It took Facebook 4 ½. It took over 16 years for 100 Million people to have a mobile phone. AI is moving fast and it’s impacting our daily lives. Competition is ramping. Google, Apple and Amazon will be there too. There are countless more, today and tomorrow. The field is exploding with innovation. It’s not just a 2023 theme. It’s going to be a theme for years to come. And it’s so very investable.
The Federal Reserve concluded its aggressive rate-hiking campaign; And then it pivoted. Fed Chair Powell indicated rate cuts could be coming in 2024, sending the message that the war on inflation was won and a soft-landing is coming. The Market ignited off this event and didn’t look back. It was a stellar finish to such an eventful and volatile year. The S&P was up every week in November and December, plus the final week in October, making it 9-straight to close out the year. The last time there were 9 consecutive weekly gains was in 2004. It doesn’t happen often.
It sure has been a rollercoaster for investors in these 2020s. Would you believe that the S&P 500 closed out 2023 almost exactly where it was in 2021? It stands at 4769 today compared to 4766 on New Year’s Eve 2021. Of course, there was a sharp decline in 2022 followed by this fierce rally in 2023. Despite the wide swings up and down over the last 24 months, the Stock Market is flat. But you know, that’s exactly what rollercoasters do too. It’s been a really wild ride.
I’ve already started the 2024 Outlook piece, which will go out next Friday. With so much ahead in the new year, it’s destined to be a long one… 2024 is guaranteed to be an eventful one.
Enjoy the Holiday weekend. We will be back, dark and early on Tuesday, in 2024.
Happy New Year!
Mike
