| Index* | Ticker | QTD | YTD | TTM Yld |
| Dow Jones | DIA | 13.03% | 15.98% | 1.81% |
| S&P 500 | SPY | 11.64% | 26.14% | 1.40% |
| S&P 500 Equal Weight | RSP | 11.81% | 13.65% | 1.64% |
| Nasdaq | QQQ | 14.52% | 54.76% | 0.62% |
| Mid-Cap 400 | MDY | 12.53% | 17.12% | 1.26% |
| Russell 2000 | IWM | 14.03% | 16.80% | 1.35% |
| Micro Cap | IWC | 16.00% | 9.09% | 1.17% |
| EAFE ex US | EFA | 10.81% | 18.07% | 2.97% |
| Emerging Markets | EEM | 7.52% | 8.90% | 2.63% |
| Frontier Markets | FM | 2.84% | 9.78% | 3.60% |
| US Bond Agg | AGG | 6.69% | 5.59% | 3.13% |
| Mortgage Backed Bonds | MBB | 7.33% | 4.99% | 3.40% |
| IG Corporate Bonds | LQD | 9.85% | 9.27% | 4.00% |
| High Yield Bonds | HYG | 7.16% | 12.41% | 5.73% |
| Municipal Bonds | MUB | 6.99% | 5.86% | 2.65% |
| Currency*** | 12/29/2023 | 12/30/2022 | Chg |
| USD/CAD | 1.3245 | 1.3549 | -2.24% |
| USD/MXN | 16.9540 | 19.4740 | -12.94% |
| EUR/USD | 1.1036 | 1.0702 | -3.12% |
| GBP/USD | 1.2729 | 1.2097 | -5.22% |
| USD/JPY | 141.0600 | 131.1100 | 7.59% |
| AUD/USD | 0.6810 | 0.6813 | 0.04% |
| USD/CNY | 7.0978 | 6.8972 | 2.91% |
| Sector* | Ticker | QTD | YTD | TTM Yld |
| Technology | XLK | 17.68% | 55.97% | 0.76% |
| Consumer Discretionary | XLY | 11.29% | 39.63% | 0.78% |
| Communications | XLC | 11.04% | 52.84% | 0.82% |
| Industrials | XLI | 13.02% | 18.03% | 1.63% |
| Financials | XLF | 13.96% | 12.03% | 1.71% |
| Materials | XLB | 9.66% | 12.44% | 2.00% |
| Healthcare | XLV | 6.37% | 1.99% | 1.59% |
| Real Estate | XLRE | 18.80% | 12.27% | 3.31% |
| Consumer Staples | XLP | 5.43% | -0.89% | 2.63% |
| Energy | XLE | -6.39% | -0.72% | 3.55% |
| Utilities | XLU | 8.51% | -7.14% | 3.39% |
| BONDS** | 12/29/2023 | 12/30/2022 | Chg | |
| Fed Funds | 5.33% | 4.33% | 1.00% | |
| 1y Treasury | 4.79% | 4.73% | 0.06% | |
| 2y Treasury | 4.23% | 4.41% | -0.18% | |
| 3y Treasury | 4.01% | 4.22% | -0.21% | |
| 5y Treasury | 3.84% | 3.99% | -0.15% | |
| 7y Treasury | 3.88% | 3.96% | -0.08% | |
| 10y Treasury | 3.88% | 3.88% | 0.00% | |
| 20y Treasury | 4.20% | 4.14% | 0.06% | |
| 30y Treasury | 4.03% | 3.97% | 0.06% | |
| Credit Spreads (BPS)** | 12/29/2023 | 12/30/2022 | Chg | |
| 1-3y Corp OAS | 0.75 | 0.87 | -0.12 | |
| 3-5y Corp OAS | 0.92 | 1.18 | -0.26 | |
| 7-10Y Corp OAS | 1.26 | 1.71 | -0.45 | |
| High Yield BB OAS | 2.04 | 3.09 | -1.05 | |
| High Yield B OAS | 3.42 | 5.19 | -1.77 | |
| High Yield CCC OAS | 8.51 | 11.53 | -3.02 | |
| * Morningstar | ||||
| **Economic Research – Federal Reserve Bank of St. Louis (FRED) | ||||
| *** Data provided by Refinitiv |
Recap
The financial market, stock and bonds, finished the year strong on positive statements from Fed Chairman Jerome Powell. He indicated the Fed was planning to cut interest rates in 2024 by 0.75%. This announcement sent stock prices higher and bond yields lower.
2023 grinded higher despite concerns of higher interest rates, inflation and a recession. The US consumer, despite the many headwinds, continued to spend money and avoided a recession. The Fed remained vigilant and raised interest rates to fight inflation for most of the year.
Technology Sector led the equity indexes higher on back of the emergence of Artificial Intelligence. Facebook, Apple, Amazon, Google/Alphabet, Microsoft, Nvidia and Tesla, aka the Magnificent 7, were the main contributors for market gains in 2023.
2024 Outlook
The market indexes moved higher into year-end on back of dovish comments from Jerome Powell. The bond markets rallied (lower yields) and priced in six rate cuts for 2024 vs. market expectations for three rate cuts.
Despite the changes in market expectations for rate cuts in 2024, we remain cautious in our outlook for 2024 due to geopolitical uncertainty, US presidential elections, and extended stock index valuations. The US government budget deficit and record high debt, exceeding $34 trillion, is also worth monitoring. While the Fed can manage short term interest rates, they have little control over long-term interest rates. The US 10-year bond is the benchmark for mortgage rates and bank lending rates.
There are a lot of positives for the US economy as we begin the new year. Interest rates near 30-year highs are providing additional spending power for consumers holding cash balances held at banks. The US consumer continues to be resilient and is spending to support the economy. Corporate balance sheets are well positioned to weather an economic slowdown. Valuations for non-Magnificent 7 stocks both domestically and internationally, we believe, will continue their bullish trend into the new year.
