In the holiday-shortened week, the Dow (+0.8%), NASDAQ (+0.3%) and S&P 500 (+0.5%) finished with modest gains. Those gains also marked a strong rally in the final two months of the year, ending 2023 as a robust year for stocks. This rally in 2023 came as a surprise to many economists, as a large portion of them have referred to the economy in 2023 as the “most anticipated recession” that didn’t happen. Of course, many of those same economists suggest that the recession has only been delayed. We have also seen some journalists report economists as saying that we can expect a huge drop in the stock market in 2024. We don’t see that, and we suggest that you don’t allow those types of headlines to scare you.
Taxable bonds and tax-free municipal bonds also gained about 0.1% - 0.2% for the week to also finish the 4th quarter of 2023 with a bang. So, after spending about 1.5 years in the dumps, bonds managed to rally their way to end 2023 in positive territory. That is a huge relief after posting a record double-digit loss percentage in 2022. Unfortunately, the 2023 gains weren’t nearly enough to offset the losses from the prior year, but their outlook remains positive for bonds. The 10-year Treasury yield finished the week at 3.88%, down about 0.02% from the prior week. That is about where it started the year, but far off its peak of almost 5% in October. The drop in bond yields were the spark of the bond rally in the last two months of the year.
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The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.