4th Quarter of 2023 Economic and Market Recap

4th Quarter of 2023 Economic and Market Recap

| January 16, 2024

Despite recession expectations stoked by tight monetary policy, banking sector failures resulting from those same high interest rates, and elevated geo-political tensions, most asset classes defied expectations and experienced positive returns in 2023. 

In fact, 2023 market returns presented a mirror image to the declines of 2022.  Don’t believe it? Check out the charts below.  The first from our 2022 Economic and Market Commentary last year and the second updated for 2023. 


U.S. Large Cap stocks led the rebound with a 26% return, as Artificial Intelligence enthusiasm propelled mega-cap tech stocks like Microsoft and Nvidia to lofty valuations. U.S. Small Cap stocks (+17%) nearly kept pace, reflecting resilient domestic consumption and beaten-down initial valuations.

Turning to international markets,  Developed Market (DM) equities (+18.9%) outperformed their Emerging Markets (EM) counterparts (+10%).

Within fixed income, high yield bonds defied expectations, posting a healthy 14% return due to the recession fears not coming to fruition in 2023. Meanwhile, the broader bond market rallied late in the year, with the U.S. Aggregate Bond Index up 5.5% as investors were comforted by the Fed’s dovish shift. Cash/Money Markets meanwhile posted a multi-decade high return of 5.1%!   

In alternative asset classes, Real Estate Investments rebounded to an 11% gain on the back of strong demand for data centers and hopes for lower long-term interest rates. And in a stark reversal from 2022, commodities fell by 8%, ending the year as the worst performer partly due to weaker demand growth from China.

Looking ahead, the Federal Reserve is forecasting three interest rate cuts in 2024, which came as a surprise to most economists and helped ignite the early Santa Claus rally in stocks. While inflation now sits at 3.1%, it has yet to hit the Fed’s 2% target. Further, prices of many goods and services remain elevated from several years of excessive inflation.  Rents are beginning to soften and oil prices finished 8% cheaper than this time last year. As the Ukraine-Russia war wages on, the manipulation of oil prices will be a key area to watch. Since 2019, Russia has decreased oil production by 6% as it tries to boost the price of a barrel. Meanwhile, the United States has increased oil production by 12% and decreased consumption by 2%, generally favoring the lower price.  American consumers and businesses will continue to benefit if this trend continues.

The top 10 largest U.S. companies returned 62% in 2023, and those stocks now make up 32% of the S&P 500, an all-time high. For perspective, the other 490 companies only returned 8% in 2023. Valuations are a cause for concern, with the S&P 500 trading at 19.5 times earnings, significantly higher than the 16x multiple at the beginning of 2023.  Those 10 large companies consist mostly of technology giants like Apple, Microsoft, Amazon, NVIDIA, and Alphabet. 2023 will be remembered for the euphoria around artificial intelligence and the exponential efficiencies ChatGPT and its competitors may bring. With interest rates likely heading lower and business investment sure to follow, we wouldn’t write these names off just yet, but a rebalance of gains to relative underperformers like international stocks (+10% in 2023) and value stocks (+7%) may be prudent, particularly because of their much lower valuations.

Meanwhile, if you are looking for headwinds, a 2024 election year and the budget fight over the next month will continue to remind you how high the Federal debt is.  Now at $34 Trillion, it represents 120% of total annual economic output--GDP. Democrats will tell you we need to raise taxes on the wealthy, while Republicans will want to cut spending.  A stalemate is typically what we can expect in an election year, which would allow the debt to continue soaring. For the time being, appetite remains strong for Treasuries even with Moody’s lowering the U.S. credit rating to “negative” from “stable,”. 

For investors, the whipsaw in relative returns from 2022 to 2023 underscores the value of staying well diversified, having the discipline to regularly rebalance by taking gains from outperforming assets classes and re-investing the proceeds in underperforming asset classes, and most importantly, not overreacting to market, economic, geo-political or other news sensationalized by both traditional and social media coverage.  This will be especially true in this 2024 election cycle.  We fully anticipate high market volatility in the weeks immediately preceding the election, which historically has led to a return to normal market volatility immediately after the results are known.

As always, please do not hesitate to reach out to your advisor and review your investment strategy for 2024.

Announcing Our New Partners and a Name Change

We are thrilled to announce a significant milestone in our firm’s evolution as we elevate two members of our team, Ken Seropian and Alex Oliver to partners. These seasoned advisors have consistently demonstrated exceptional dedication to their clients and have contributed immensely to the firm’s overall success and growth. Over the last 13 years, Ken has built our institutional retirement plan (401k, 403b) consulting business to nearly $400M in assets under management.  In his eight years with First National, Alex has become a highly sought after advisor for dentists and has authored a white paper addressing the financial planning needs of dental professionals.  We are excited to welcome them to our leadership team!

In conjunction with this milestone, we have undergone an organizational restructuring from an S-Corp to an LLC which necessitated a re-branding initiative. Our new identity as First National Advisors better reflects our commitment to providing exceptional advisory services as investment fiduciaries. We look forward to maintaining the personal and professional relationships we have continually built with our clients over years.

Tax Season Webinars

Once again, Alex Oliver will be leading four educational webinars to enhance your financial well-being. These can serve as an introduction or a review of several financial concepts that you may want to discuss further with your advisor. We strongly encourage you to share these webinars with friends and family who may be in need of financial advice, as these serve to introduce our general philosophies as a firm.

Visit FNCAdvisor.com/webinars or use the respective registration links to attend or receive a recording 24 hours after the event.

Investment Vision for 2024

Thursday, February 15 at Noon.

The Quick & Dirty Personal Finance Checkup

Thursday, February 29 at Noon.


Roth Conversions to Lower Income Tax Liability

Thursday, March 14 at Noon.


Reviewing “Die With Zero” and “I Will Teach You to be Rich”

Thursday, March 28 at Noon.


January Financial Planning Suggestions


It is time once again to set those New Year’s resolutions – let us give you some financial ideas to consider for 2024!


  • Maximize your 401(k) or 403(b) plan at $23,000. If you are over the age of 50, add another $7,500 for $30,500 total.
  • Maximize your Roth IRA or backdoor Roth IRA with $7,000. Add another $1,000 if over age 50.
  • Contribute the maximum to your Health Savings Account: $4,150 for a self-only plan, $8,300 for a family plan, and another $1,000 if over age 55.
  • An I-bond purchase with $10,000 could be considered yet again, but the current rate of 5.27% is likely to fall in April. If you have existing I-bonds, please call us to discuss the timing of redeeming those.   
  • Review your estate plan, especially due to the expansion of the MA estate tax credit to $2M and before the Tax Cuts and Jobs Act expires on December 31, 2025.
  • Schedule a comprehensive review with your financial advisor.