U.S. Value Team

Three Things That Drove the Market in 2023

Three Things to Look for in 2024

1 The Regional Bank Crisis and Subsequent Monetary Stimulus
The banking crisis in March seemed to disappear nearly as quickly as it appeared, as the FDIC and competitors quickly stepped in to limit the collateral damage in the banking sector. The stock market quickly shrugged off the challenge and rallied.

1 The Lagging Impact of Monetary Tightening
With interest rates at a plateau, we will closely watch how consumers and businesses fare with high interest rates and stubborn inflation. Interest rates impact consumer spending, as mortgages, auto loans and credit card rates are higher. Corporations and small businesses pay more to borrow money as well, impacting profit margins. And there are always unexpected issues – the “unknown unknowns” – that could surface as we pivot from tightening to easing.

2 Exuberance Over Artificial Intelligence
The world was both captivated and repulsed by the concept of artificial intelligence (AI), which exploded into the public consciousness. AI could either save the planet, or turn us into batteries for machines – or maybe both. For investors, the trends led to the “Magnificent Seven” stocks that led the S&P 500 to gains of over 20% this year.

2 A Pivot in Leading Economic Indicators
As equity investors, we pay close attention to the direction of the economy. We will look to our favorite data points for any indication of broad-based economic growth.

3Federal Reserve Hikes, Pauses, Pivots
Investors watched and waited for signs that the Fed would pause its rate-hike campaign. Now they wait for the first rate cuts, expected in mid-to-late 2024.

3 Investors Shifting From Cash to Risk Assets
While cash was king in 2023, we expect to see investors shifting out of cash into risk markets in 2024 as interest rates decline. This could be a catalyst for a stock market rally.

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