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What a Difference a Year Makes

New Year’s is when we all reflect on what has been and what we can, and maybe should, do differently in the new year. The same can be said for the financial markets; market pundits and prognosticators will reflect on what they got right (spoiler alert – most completely missed the market rebound of 2023) and pontificate on what will happen in 2024. While many financial experts are well-intentioned and highly educated, we believe the best have the humility to appreciate the difficulty in forecasting the future. 

We at Charter Oak also recognize that our clients do not invest on a calendar year basis, achieve their goals on exactly December 31, or begin their next big adventure on January 1. Your investments, goals, and life achievements happen in your time, and we are here to help get those right. That said, a new year is an excellent time to look back at the markets and sharpen our focus on the year ahead. 

2023 – The Rebound

A financial pundit called the time from January 2022 through December 2023 the hammock, as the chart below illustrates. As measured by the S&P 500, the stock market started January 2, 2022, with a value of around 4,700, and closed December 29, 2023, with a value of about 4,700. As you can see, getting from one side to the other was not a smooth ride.  


Our focus is on your goals, and historical perspective allows us to maintain a longer-term focus, take advantage of those lows, and benefit from growth. 2023 was good for both the stock and the bond markets, quite the reversal from 2022 when bonds had one of their worst performance years in history.

Most importantly for our clients, a diversified portfolio returned around 17% in 2023—a welcome rebound after the historically poor performance of a diversified portfolio in 2022. 



2024: The Year Ahead

As we look to 2024 and beyond, your Charter Oak team will diligently monitor the items below, to name a few. 

The Federal Reserve and InflationThe story of 2022 and 2023 continues into 2024 but with a little more certainty. Inflation trended lower in 2023; initial estimates are that it will continue into 2024. We are seeing decreased home and food prices and what people pay for rent. These have been sticky items in the inflation numbers, and as these numbers continue to fall, we should see inflation eventually get closer to the Federal Reserve's preferred 2% target.

U.S. Economic Growth. Does GDP growth remain positive because of continued consumer spending and business investment? To the surprise of many, consumer spending has remained strong, thus providing buoyancy to the economy. The unemployment rate remains historically low at just under 4%, hopefully giving our consumer-driven economy the fuel to avoid a recession. While this is important, there is often a disconnect between economic expansion and stock market growth. The stock market is forward-looking, and if we do have a mild recession, the stock market could have already moved past it before we even knew the recession had occurred.

Artificial Intelligence. What is all this Artificial Intelligence (AI) about? Does it help companies’ bottom lines? While this is a multi-year and probably decades-long phenomenon, it can make workers more productive. And as we think about economic growth, it is an output of how many workers we have in the U.S. economy and how productive they are. If AI can make those workers more productive (your author is even using AI to make this writing more concise!), this should be good for longer-term economic growth.

A Presidential Election. We will save that one for another Acorn! But the short answer is, over time, it matters little for stock market and bond market returns. 

Headline Risk. There will be unforeseen geopolitical events, negative business headlines, and, occasionally, good news, as the chart below from 2023 highlights. Volatility in the market often increases during these market cycles, and these last two years remind us that over the long term, the U.S. economy and corporations continue to evolve and adapt and create wealth for investors. This is why we remain focused on your long-term financial goals so you can achieve your life goals. 

We hope the above has been a helpful summary of 2023 and the outlook for 2024. As always, the advisors at Charter Oak welcome your questions and comments, and we wish our readers an incredibly healthy and joy-filled 2024.