Q4 2023 Market Review
In the three months ending 2023, the Ellis household was quite busy, welcoming our third child into the world and losing my grandfather to a short battle to cancer. Our new daughter fills her family with joy, not unlike her great-grandfather.
The financial markets were also full of action, with asset prices landing solidly ahead of where they were at the end of the third quarter. The resurgence came after headline inflation data slowed in October and November, followed by the Federal Reserve signaling that they were largely finished raising interest rates in this cycle. The prospect of lower borrowing costs boosted investor sentiment, leading market participants to rush back into risky assets like stocks and long-term bonds.
Peeling Back the Inflation Data
While inflation numbers on paper are coming down, many households are scratching their heads wondering why it feels like life is still becoming more expensive, even relative to growing incomes. The reason is that the cost of services and housing remain the fastestgrowing segments of data, while the cost of goods is declining. In 2022, when inflation was being driven higher, the cost of goods was materially affected by supply chain issues caused by shutdowns during the worst of the economic fracturing of COVID-19. As supply chains have come back online, goods prices have come back down, but housing remains in a shortage nationally, and the prices of services continue to rise. The following charts demonstrate this data. The first shows the rate of change of goods excluding food & energy, and separately services excluding housing.
Source: TS Lombard as of 01.11.2024
The second shows the rising cost of housing over the last decade..
Despite this dynamic, the Federal Reserve remains committed to holding interest rates steady for the time being.
How Will the US Election Affect the Markets?
This is the question that seems to be at the forefront of everyone’s mind right now as we receive the results of primary elections and head into the fall. My short answer is that “I don’t know,” as short-term forecasting is a fool’s errand, so it’s helpful to use history as a guide. The chart below shows data for the US stock market going back to 1945 and the average returns while government was controlled by different parties in varying mixes through time. Average annual returns for the S&P 500 over any given market regime was between 7.1% and 13%. The takeaway is that regardless of the party in control, the market generally moves upward over any meaningful timeframe. The regulatory environment in Washington can play a significant role in economic growth, but the more important factor is that executives of companies are remarkably good at finding ways to grow their earnings.
As an investor, it’s imperative that you remember your timeframe and allocate your risk appropriately. The likelihood of losing money investing declines dramatically with the length of your time horizon. In fact, the chart below demonstrates the probability of having negative returns over various rolling periods of S&P 500 returns going back to the year 1900. On a day-to-day basis, investing in the stock market can feel like a 50-50 gamble. Over even just a 5-year timeframe, however, the likelihood of losing money is dramatically less.
We’re here to help you solve the time horizon equation and avoid becoming distracted by the noise of the current news cycle.
With you for the long haul,
Carter Ellis, CFP®
Founder
Disclosures:
Past performance is no guarantee of future success. This material is for informational use only and should not be considered investment advice.
The opinions expressed are those of Guardian Wealth Advisors, LLC. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward looking statements cannot be guaranteed. Investing involves risk. Principal loss is possible.
Investment advisory services offered though Guardian Wealth Advisors, LLC D/B/A Valley Peak Financial. Guardian Wealth Advisors, LLC ("GWA") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about GWA's investment advisory services can be found in its Form ADV Part 2, which is available upon request. GWA-22-35
