ACG Market Review – Q4 2023

(Download the full report HERE)

  • Economy – An economic soft-landing in the U.S. moves from a low probability event to the consensus view
      • Softer inflation data led to increased market expectations for Federal Reserve rate cuts in 2024 and into 2025
      • The positive feedback loop for risk assets from the easing of finance conditions and Fed pivot was reinforced by a few other factors:
        • The broader soft-landing narrative
        • Consumer resilience
        • Strong Q3 2023 corporate earnings and stable 2024 consensus earnings expectations
  • Equity – Narrative around peak fed rates sparks widespread rally across equities
      • U.S. equity markets saw a broadening of leadership following recent dominance of the Magnificent Seven
        • Despite the broadening of the rally, most of the Magnificent Seven names all still outperformed in Q4 with AMZN +19.5%, MSFT +19.1%, META +17.9%, NVDA +13.9% and AAPL +12.5% all beating the market
      • Small caps and other formerly out-of-favor areas showed strength during the quarter

  • Fixed Income – Fed comments and economic data led to projections for a Fed pivot to cutting rates
      • Treasury yields were volatile with a 2- and 10-year notes down 75 and 70 basis points respectively during Q4
      • As a result of the above, most financial conditions indexes saw significant easing
      • Fixed income investments saw some of the strongest quarterly returns on record
  • Risks/Other Considerations
    • Risk narratives centered around a potentially premature move to cut rates by the Fed, the lagged effects of the tightening cycle on corporate profits, overbought conditions following such a strong rally, and geopolitics focused on potential escalation in the Middle East and/or Ukraine

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Download the full report HERE where we discuss:

  • Market Index Review – December 2023
  • Q4 2023: Is the Fed Really Done Raising Rates?
  • Did We Just See that Much Anticipated “Fed Pivot?”
  • An Economic Soft Landing Seems More Likely, But…
  • …Recessions Always Start as Soft Landings
  • Earnings Outlook Strong, But Not Without Risks
  • The Effect of Rising Rates on Corporate Profits
  • Bond Volatility: “November Was a Good Year”
  • What Will 2024 Have in Store for Rates?
  • Interest Rates to the Rescue!
  • Despite Headline Returns, Not All Stocks Performed Well
  • Europe Continue to Lag – Mostly Due to Fundamentals
  • Where do Equities Go From Here?
  • Risks: Higher Interest Rates Force Austerity
  • Risks: Geopolitics