MARKET UPDATE DECEMBER 2023

SUMMARY:

• The stock market continues to trend higher since the end of October.

• We are now getting close to the all-time high for the S&P 500 reached at the beginning of 2022 before this bear market began.

• The inflation reports have been positive lately.  If inflation data continues to show improvement, the concern will then become recession.  Can the Fed achieve a “soft landing”?

• We expect the volatility to continue until it looks like the inflation battle has been won and a recession has been avoided.

The current year, 2023, has been overall positive for the stock market but it has been anything but a smooth ride.

We saw a strong move higher in May, June, and July only to be followed by a steady decline in August, September, and October.  But we have seen a sharp move higher since the end of. October.  The report from the Fed last week was positive news for the market.

When we step back and look at the entire bear market that began at the beginning of 2022, we see a two-year period of high volatility.  We see both the S&P 500 and the Nasdaq inching closer to the all-time highs reached at the beginning of 2022.   As of the market close on Friday December 15th, the S&P 500 is down about 1% from its previous peak at the start of the 2022.  The Nasdaq is down about 6% from its all-time high.  The small-cap stock index (the Russell 2000) has not recovered as much as the large cap indices – down about 19% from previous high.  In the graph below, you can see the nice bounce off the October 2022 lows.

The reality is that no one knows if the worst is over or not.  No one is ready to declare victory over inflation just yet.  And even though the economy keeps humming along, a recession is still a possibility.

Because of the uncertainty, it is important to follow a disciplined approach to investing.  It is critical to have an investing strategy that wins no matter which way the market moves.  No one can predict which way things will move in the short term.  But we all know that in the long term, the direction of the stock market will be higher.  Stay disciplined, my friends.

Happy Investing,

Phil

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