Investing Update: 2023 Recap & 2024 Outlook
What I'm buying, selling & watching
The stock market ended 2023 just shy of new all-time highs. It turned out to be one of the better years for investors. A lot of things worked.
Dow: +13.70%
S&P 500: +24.23%
Nasdaq: +43.42%
Small Caps: +16.8%
60/40 portfolio: +18%
REITs: +11.8%
Gold: +12.7%
Bitcoin: +155.8%
This outperformance didn’t come without some ups and down. There was a lot of volatility throughout the year. This chart illustrates all that investors experienced in 2023. I even forgot about some of these things. At the time a number of these seemed like very important events. Looking back they hardly mattered and proved to be short term noise.
Here is how the Dow components finished out the year. Salesforce and Intel were the big outperformers. Chevron and Walgreens were the worst performers. Chevron is an interesting stock poised for a rebound as we head into 2024. Walgreens on the other hand, I’d think has to be endanger of being removed from the Dow. Over the past 2 years it is down over 50%.
The best performing stocks in the S&P 500 in 2023 were led by Nvidia and Meta.
Then we have the worst performers in the S&P 500. A lot of health care related name appear on this list. That may be an area to explore for opportunity in 2024.
The 60/40 portfolio, which many had left for dead after the brutal 2022 it experienced, where it had the 3rd worst year ever, bounced back with the 2nd best year since 1998, up 18% on the year. The 60/40 portfolio is alive and well!
With as good of a year as 2023 turned out to be, you could probably win a bet on if the S&P 500 made any new all-time highs in 2023 or not. It was actually the first year since 2012 without an all-time high. I did not realize this.
Another part of the S&P 500 that I found interesting as the year ended was the number of stocks that underperformed the S&P 500. 72% of stocks in the S&P 500 underperformed the index. Going back to 2000 that is the highest percentage of the 500 stocks to underperform the index. A little surprising in a year the S&P 500 finished up 24.23%.
2023 was the complete opposite of 2022 when you compare the returns across different equity and income asset classes. 2023 was up consistently across the board with even cash earnings over 5%.
In 2022, other than cash being positive 1.5%, all the other assets classes were negative.
Here is a good chart from
which goes into more detail on the asset class returns in 2023.
I finish with my favorite chart of asset class returns looking back to 2011 through 2023.
Analysts Missed In 2023
The best and brightest were wrong in 2023. The consensus among analysts and strategists as we entered 2023 was that the S&P 500 was in for a down year. It was the first predicted down year since 1999. The consensus was wrong, way wrong.
Analysts on Wall Street called for an average forecast at year-end of about 4,000. The year ended at 4,770. About 19% above where analysts predicted 2023 to end up.
Here is where the various Wall Street firms predictions were to start 2023.
My outlook for 2023, Investing Update: 2022 Recap & 2023 Outlook had some right and some wrong. I had predicted we finished the year at 4,350 on the S&P 500. I ended up a little low.
I did say that we would start out rough and then that we would rally into a new bull market. Overall I’m happy with what I had predicted.
Things are as bearish as I can remember for such a long stretch. Everyone I talk to seems to be bearish and negative about the stock market. Friends and family have told me they’re putting their money here and there instead of in the stock market.
The last time these conversations came up was 14 years ago. It was the same people at the same time of the year as I recall it well during the holidays in 2008. As we now know it turned out that the stock market had already bottomed in September of that year.
Consensus and seemingly everyone being on the same side of the boat looks good and sounds good until it isn’t. If you’re looking at investing in months sure you can be bearish and skittish to invest. But my investment horizon is many years out. If your horizon is measured in years, this is what you want if your putting money to work.
I’m expecting a tough start to the year. I think we retest the October lows of 3,577 on the S&P 500. I think it will hold and then things take off to have a positive above average return for 2023. I’m calling it a rock n’ roll rally. We’ll rock backwards and go down, but then that momentum fuels us to the upside as a new bull market begins. For a number as I know many of you’ll ask, I’ll say 4,350.
My bullish view and this side of the boat has a lot of empty seats. I’m fine with that. In my next investing update on 1/21, I’ll share what buys I’m going to be making to start the year.
This reinforce the belief that nobody has any idea what’s going to happen. Nobody can tell the future. Not what the economy or stock market will do. It’s a good reminder to reread one of my most read posts ever, You Don’t Know, I Don’t Know, Nobody Knows.
My Performance in 2023
As 2023 ends, I wanted to look at where my actively managed portfolio and my 3 stock picks for 2023 finished up versus the major indices.
My Portfolio (Actively Managed): +81.92%
Dow: +13.70%
S&P 500: +24.23%
Nasdaq: +43.42%
This was one of my best years ever with a 81.92% return. This will mark the 5th time out of the past 7 years which I’ve beaten the S&P 500.
My stocks performed very well in 2023, led by my favorite stock for the year, Nvidia. It has been one of my biggest holdings and it was the top stock in the S&P 500. My second biggest winner was one of my other largest holdings and had the 5th best return in the S&P 500, Uber.
My 3 Stocks For 2023. Investing Update: 3 Stocks For 2023
Nvidia: +238.87%
Amazon: +80.88%
Deere: -6.74%
I’m not sure I can pick the top stock in the S&P 500 again in 2024 like I did with Nvidia in 2023, but I will make an attempt to when I release my 3 stock picks for 2024 in my next Investing Update. This will come out on Saturday January 13th.
Analysts Outlook 2024
So what’s in store for 2024? According to Wall Street, the expectations are again rather muted as you can see below. Only Ed Yardeni of Yardeni Research is predicting a double digit return in 2024. The average expected return is roughly 2%.
Warren Pies made an interesting observation about analysts forecasts.
For the second year in a row, analysts views are very conservative. The career risk narrative related to their year-end predictions is interesting to think about.
My Outlook
My outlook on 2024 is a bit more bullish than Wall Street.
After looking at some data points and doing my research, I think we have another green year. It won’t be as good as 2023, but it should make investors quite happy.
First, I really liked Ryan Detrick’s chart on what follows yearly gains of 20%+ for the S&P 500. It doesn’t usually finish higher (over 20%+) as the year prior, but it does finish positive the next year.
If we’re going to see an up market again in 2024, what pushes it higher? I think one of the important pieces as we enter 2024 is the amount of cash that is not in stocks.
Just look at the record inflows to cash that we saw in 2023.
As we know institutional money is what moves the stock market. And what do they have a lot of? Cash! Try the most in history.
2023 finished with an all-time high of $6.3 trillion sitting in money market funds. Here is a breakdown by the large financial institutions.
Bob Elliott also noted in this chart how low equity allocations are relative to how near all-them highs the stock market is at. People are still underinvested in stocks. The higher the market goes, the more amounts of this cash will find their way into stocks.
As you can see the nice and easy 8-10% returns in the stock market hardly ever happen. The ups and downs are much wider than that. I for one didn’t realize how big of swings the market has taken historically from one year to the next. Only 4 years since 1950 have seen a 8-10% return.
With that I think the S&P 500 finishes the year at 5,450. I don’t think we see a smooth path to get to that point either. We will have volatility. I’m expecting a pullback during the year of over 10% at some point. It usually always happens. Similar to 2023 when fear mounts you stay the course and find something to buy.
Something will also happen this year that nobody sees coming. No analyst or strategist will have this in their forecasts or predictions. It will spook investors and the stock market, but it will turn out to just be short term noise. Just like most of the events of 2023 proved to be.
Moves I’ve Made
S&P 500 Index With the quick selloff to start 2024, I decided to add to my S&P 500 index holding on Friday.
The Coffee Table ☕
I’ve read a lot of outlooks, predictions and forecasts for the road ahead in 2024. Many of them aren’t worth a darn and are written to just generate clicks and predict off the wall things to try and get attention on social media. Below are some of the ones that I feel are worth reading from people whose opinion and views I respect.
Sam Ro,
: 9 big stories to watch in 2024Caleb Franzen,
: My Outlook Is SimpleMichael Batnick, The Irrelevant Investor: 10 Prediction for 2024
Ben Carlson, A Wealth of Common Sense: 10 Questions for 2024
J.C. Parets, All Star Charts: My 3 Predictions for 2024
Nick Maggiulli, Of Dollars & Data: Will 2024 Be an Up Year for the Stock Market?
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