As we bid farewell to another year, it's time to take stock of the financial landscape and chart a course for success in 2024. After the turbulence of the 2022 bear market, the stock market was in recovery mode during the first half of the year, offering hope for investors. However, after peaking in late July, the market went down for three straight months on news of inflation, turbulence overseas and the economy in general. Just when it seemed like things were not improving, we had a fantastic November and December giving us a nice market increase moving into the new year.
The Rollercoaster Ride: A Recap of 2022
Before we explore the events of 2023, let's take a moment to reflect on the rollercoaster ride that was 2022. It was a year marked by significant volatility, with the stock market reaching its bottom in October. The market was reacting violently to the Federal Reserve’s hawkish monetary policy. The Fed increased interest rates at the fastest clip in history in its attempt to slow down inflation.
The Banking Crisis: SVB Collapse and Recession Predictions
After bottoming in October, 2022 the market rang in the new year in recovery mode. However, the financial media cast a somber tone as many analysts predicted a 90% chance of a recession. The collapse of SVB, a prominent bank, in March added fuel to the fire, leading to widespread concerns about a banking crisis. These events sent shockwaves through the financial world, raising questions about the stability of the banking sector.
Inflation: A Tug of War with the Federal Reserve
One of the key factors that dominated the financial landscape in 2023 was inflation. After reaching peak levels of 9.1% in 2022, inflation began to trend lower but remained above the Federal Reserve's long-term target of 2%. The Federal Reserve, led by Chair Jerome Powell, embarked on the fastest tightening cycle in history to combat inflation and bring it down to the desired level. However, Powell acknowledged that there was still a long way to go.
Interest Rates: A Balancing Act
Accompanying the battle against inflation was the Federal Reserve's approach to interest rates. In July, the Federal Open Market Committee (FOMC) raised rates by 25 basis points, marking its eleventh rate hike since March 2022. However, no further rate hikes occurred since then, as the Fed adopted a cautious stance to minimize risks to the labor market and the overall economy. Powell acknowledged that current policies were restrictive but recognized the need to address the persistent inflationary pressures.
Earnings Season: Surpassing Expectations
Despite the challenges posed by inflation and interest rates, the third-quarter earnings season brought some positive news. A staggering 82% of S&P 500 companies reported actual earnings that exceeded analyst estimates. This impressive performance demonstrated the resilience and adaptability of businesses in the face of economic headwinds.
This is such a good reminder that we are investing in the best companies in the world, not politicians, governments, or economists. I reiterate, the great companies of the world are phenomenal drivers of profit and growth and you, as their shareholders, benefit from their innovation, progress and success. This is an important reminder as it’s easy to get caught up in the vagaries of the financial media and the endless stream of fear they promote.
The Mindset Lesson: Focus on What You Can Control
Amidst the uncertainties and challenges, it's crucial to maintain a positive mindset and focus on what you can control. Worrying about factors beyond your influence only leads to anxiety. Instead, channel your energy towards understanding the risks and taking proactive steps to mitigate them. By focusing on the aspects of your financial journey that are within your control, you can set yourself up for success. At Seaside, we focus on planning and proactively finding ways to help you save money on taxes, both of which are in our control. We do things like rebalancing and tax loss harvesting as well which are controllable factors we can influence.
We have 2 options:
- Focus on what we CAN’T control. If we do this, it leads to anxiety and worry.
- Focus on what we CAN control. This can actually help us reduce potential risks and do the right things to help us be more prepared.
2024: Seaside Updates
As we embark on the journey towards financial success in 2024, it's essential to remain informed, adaptable, and focused on what we can control. The events of the past year have taught us the importance of resilience and proactive decision-making.
It’s our passion to help you navigate the ever-changing financial landscape with confidence and make choices that align with your long-term goals to help you create peace around the issue of money.
We are excited to let you know that next year we are rolling out a robust estate planning process to enhance our offering in this important space. We will be sharing details with you in early 2024.We are expanding our tax planning capabilities even further and have invested significantly in this area to create value for you.
In addition, we are teaching more financial classes throughout the community in our efforts to educate and empower as many people as possible. Our YouTube channel continues to attract many visitors who enjoy learning about financial planning and the markets. We are also hiring talented, smart people to join our growing team and I’m excited for you to meet them.
It’s a pleasure to be part of your journey. We wish you a happy, healthy holiday season and a prosperous New Year!
This commentary reflects the personal opinions, viewpoints and analyses of the Seaside Wealth Management, Inc. employees providing such comments, and should not be regarded as a description of advisory services provided by Seaside Wealth Management, Inc. or performance returns of any Seaside Wealth Management, Inc. client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Seaside Wealth Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.