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

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

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