Q4, 2023 Quarterly Report and Year End Review

This is the Q4 and yearly review for stocks and bonds in 2023. You can watch a video review of this blog here. And go here to see the complete market review slide deck shown in the video. What a difference a year makes, or really two months. Last year when I did this review, I mentioned that I “typically put up a graphic showing how major markets faired over the year, but who wants to see a bunch of big red down arrows?” Well, good news, and I know you know this, it’s a bunch of green arrows now. Take a look at slide 3.

So we see green arrows for the year of 2023, but really all that great growth to dig us out of the hole that 2022 left us in came in the last two months of the year. I always preach that markets move quickly – to the up- and downside – so you must stay invested every single day. Did you, or did you get out at some point and miss that November / December rally?

Take a look at the next slide, slide 4. Let’s take a longer look at markets with our next slide here. I like what I see, and I know you do, too. But let’s think about this for a bit and break it down.

You know day-to-day market movements can feel like a Sunday drive in the country…aimless with no purpose and no idea when it’s going to end. But stock ownership will get us home (and that home is retirement) because, over time, stocks track the general performance of the economy. And overall, performance of the economy will continue to be good, we just have to endure the potholes and bumps in the road along the way. 2022 was a giant pothole and most of ’23 was a bumpy road, but let’s not lose sight of the entire pleasant drive. If you have any questions, if investing worries you, reach out to me.

A Look Back at 2023

To view this post as a video go here. Let’s take a look back at 2023 and the investing year that it was. I mentioned in my March, ‘23 video the concept of “sideways trading,” which we saw at a couple points throughout this year. Again, “sideways trading” is when the market is up, down, up, down with no real direction either way. We certainly saw one direction (insert Harry Styles reference here) over the last couple of months, with the market – as measured by the S&P 500 – shooting up over 15% since the end of October. I know your retirement portfolio appreciated that.

If you’ve read my previous posts, I’ve written multiple times about how the market moves quickly, so you want to stay invested in it every single day, so that you don’t miss out on those big market run-ups. I’m going to share a quote from my March post: “Before this market takes off again, use this sideways market as an opportunity to get your IRA, 401(k), and other retirement contributions into their respective accounts. The market is currently presenting you with a great opportunity to get in before it takes off again.” I knew it was going to take off again, I just did not know when it would start.

Did you get those contributions in when I told you to? Never forget, we get the best returns when we feel the worst about the market. Hopefully this Q4 rally is an indicator of a strong stock market for 2024 as we finally dig out of the hole 2022 left us in. If you didn’t take my March advice because you were too worried to invest when you felt uncertainty with stocks, reach out to me, I can help so you don’t miss out on the next market run-up. Thanks for reading and I’ll see you in ’24.

Q3, 2023 Quarterly Report

To view this blog as a video go here. Q3 saw the returns on stocks – and bonds, too – down for the quarter. View the quarterly report here. While we had a strong July for stocks, September gave back those gains and then some. It happens. Very seldom do we see slow and steady growth to stocks. It’d be great to see, but it’s just not a reality. Stocks are like rollercoasters: sharp ups and downs, quick turns, and the occasional loop the loop. If you invest in stocks, it’s imperative that you have a long-term outlook. And a long-term outlook is several years and into decades. So, let’s look at an overview of Q3. A bunch of red arrows on page 3 from the linked report above, but then we look longer over several years – 5 and 10 on page 4 – and we see all green arrows. And that’s the point…a diversified stock portfolio will build wealth over time, but it needs time to ride it out so it can correct those down markets. The best thing you can do as an investor is to stay invested, continue making your 401(k) and IRA contributions, rebalance when your portfolio when it gets out of line so that you can take advantage of opportunities, and keep your investing costs low, too. This is how we build wealth for the long-term. Investing in a diversified stock portfolio is really believing in its long-term growth potential, while understanding the volatile short-term movements don’t have any impact on us as long as we don’t let it impact us. Understand it’s a rollercoaster ride and the payoff comes at the end. If you have any uncertainties about investing and you need some guidance to get you through it, reach out to us.

Q2, 2023 Quarterly Report

To see this blog post as a video, go here. Here is your Q2, 2023 Quarterly Report. Q2 was strong for stocks, and we needed it. I don’t know for sure, but I feel like we’ve dug out of the big hole of 2022 and we’re also finding our way out of the “sideways trading” with which we started ‘23. Let’s look at an overview of stocks and bonds for Q2 starting on page 3. I see a lot of green arrows led by the US stock market totaling a nearly 8.4% return for Q2. Take a look at the next slide on page 4, look at stock returns on a 1, 5 and 10 year time line. We see a bunch of green arrows, and that’s definitely to be expected over 5 and 10 years, simply because stocks are long-term investments; they are not made to be owned for a couple of months or even for a couple of years. You saw in 2022 what short-term stock ownership can do. It can wipe out 15%, 20% or more of your portfolio pretty quickly. While that is definitely hard to stomach, you want to focus and believe in what stocks can do for you and have done for you and others over several years and several decades. I mentioned earlier that stocks are long-term investments. In order to see their robust returns in your portfolio, you must have consistent exposure to them, because diversified stock investments compound your money. You invest a little, it grows, the earnings your investments generate grow, too, and the whole thing feeds upon itself and gets bigger and bigger…like a snowball rolling downhill. And that leads to the wrap up article written by David Booth, the founder of Dimensional Fund Advisors. You can pause the video to read through the article. The miracle of compounding allows us to snowball our retirement portfolios. This is how we build wealth for retirement: invest, let it grow, invest some more, and let that grow, plus, let the original investment and its growth, grow, too. The key takeaway with compounding is that you cannot interrupt it. Pulling money out of the stock market because you’re scared at what’s going on has such an incredibly detrimental impact on the overall health of your retirement portfolio. Were you at any point scared by 2022, or the pandemic driven stock market events of 2020, the end of 2018, were you an investor in 2007 or 2008? It’s natural to feel scared, uncertain, or unsure about the stock market, but those are temporary feelings and not long-term realities of the stock market. We make the most money when we feel the worst about stocks, so don’t interrupt compounding. If you have any uncertainties about investing and you need some guidance to get you through it, so that you can compound your portfolio and build wealth for your retirement and for future generations, reach out to me.

"Bottoms Up!"

Bottoms up! [To consume this post as a video, go here] While more so of a drinking term, I think “bottoms up” can apply to our current stock market environment. In my March video, I explained the concept of “sideways trading,” where the market slowly goes back and forth with no real direction up or down. I also mentioned how sideways trading was a great opportunity to get money into the market before it takes off again. Did you take advantage of it? I don’t know for sure – and only time will tell – but I think we’re starting to see the market take off from here to give us a positive return for 2023 as we climb out of a very tough 2022. The market formed a “bottom,” and now we’re going “up.” Bottoms up! And I think it makes sense, too. 2022 was a really challenging stock market year: and it’s not often we have two down years in a row; we still have a strong labor market despite the Fed’s rate hiking measures to cool it off in an attempt to rein in inflation; inflation has cooled and as an economy we’re accepting more normalized interest rates after living through a very low interest rate environment for several years. Additionally, those more normalized interest rates are giving our safe and fixed investments a nice boost with savings accounts and money market funds north of 4%. Overall, I think the economy and stock market fundamentals are on a strong footing as we hopefully come out of our sideways trading to finish positive for ‘23 as we lead into a maybe strong ‘24. If you have any questions on this or you need help, reach out to me.

Q1, 2023 Quarterly Report

Watch this post as a video. A strong January provided enough energy to ultimately overcome March’s negative bank headlines to give us a much-needed positive quarter to start the year. Some of those dour bank headlines were: FDIC’s takeovers of Silicon Valley Bank and Signature Bank; UBS agreeing to buy Credit Suisse for more than $3 billion dollars; and a handful of regional banks following in the path of SVB and Signature by shuttering their doors, as well. Worrisome headlines for sure, but when headlines worry you, bank on your investment principles. And that leads into the DFA article on page 15 of the Q1, 2023 Quarterly Report. I highlighted a couple key sentences / bullet points. There will always be market uncertainty in the short-term; those uncertainties, or new news, or market events that we don’t know yet how to react to drive the market’s daily ups and downs. But the long-term direction of the market is up, it’s proven that to us over a century now. So take comfort in that market certainty that its only long-term movement is up. Hope is not a strategy, and repeated market timing is hope. It’s hoping that you’re getting correct the short-term market movements. Rather, if you stay invested every single day, you’ll get the bad with the good, but over the course of your investing lifetime, you’ll get far more good and more of it…and that’s how you build wealth for retirement. Thanks to financial innovations like mutual funds and ETFs, we investors have easy access and entry to investments from around the world. And now especially with brokerage fee compression over the last few decades, we can do it for super cheap, too. When you think about it, it’s amazing how easily I can tap a couple buttons on my phone and invest in thousands of companies domestically and abroad. That is diversification! And it’s a great way to reduce external forces that can negatively impact your retirement portfolio. To wrap up, we saw negative news in Q1, and there’s going to be something negative in Q2 and so forth, but don’t let that derail your retirement portfolio. Control what you can control: how you react, time in the market, and diversifying your assets. If you need help, contact us here.