Will 2023 be a bad year for stocks?
The good returns for 2023 are thanks in no small part to the brilliant performance of the last three months of the year — fueled by growing expectations that the U.S. economy will avoid a recession, and that the Federal Reserve will soon begin to cut short-term interest rates.
As a whole, analysts are optimistic about the outlook for stock prices in 2024. The consensus analyst price target for the S&P 500 is 5,090, suggesting roughly 8.5% upside from current levels.
By all accounts, 2023 was a prosperous year for investors. The S&P 500 posted a gain of 24.33% for the year. But that performance followed a tumultuous 2022, in which the market lost 19.44%. If you balance out the two years, you'd have about broken even.
Stock market performance in 2023 was a reflection of the relatively strong U.S. economy. The S&P 500 index increased 24.31 percent, more than twice the long-run average return on U.S. large-cap stocks. China's stock returns reflect significantly lower economic growth in 2022 and 2023 relative to pre-COVID levels.
Key Takeaways:
The 100-minus-your-age long-term savings rule is designed to guard against investment risk in retirement. If you're 60, you should only have 40% of your retirement portfolio in stocks, with the rest in bonds, money market accounts and cash.
It is now ahead 10.6% year-to-date in 2024 as concerns over a U.S. economic recession have subsided and investors have shifted their attention to the timing of a Federal Reserve pivot from monetary policy tightening to policy easing.
Economic growth actually accelerated above its 10-year average in 2023. That resilience, coupled with a fascination about artificial intelligence (AI), changed investors' collective mood. The S&P 500 soared throughout the year and finally reached a new high in January 2024, making the new bull market official.
Throughout 2023, Buffett consistently added more shares to one of Berkshire's top holdings, Occidental Petroleum (OXY -0.36%). Berkshire Hathaway established its position in the company when it put up $10 billion in capital to facilitate Occidental's acquisition of Anadarko.
Instead, earnings may drip down slowly throughout 2023, frustrating market bears. Interest rates on long-term bonds have fallen lower than those of short-term bonds, creating an inverted yield curve that usually portends an upcoming economic slowdown.
| Number | Category | Investments |
|---|---|---|
| 1 | Overpriced EV producers | Tesla |
| 2 | Oil | Brent Crude, Exxon Mobil, Chevron, TotalEnergies, Shell, BP |
| 3 | Selected luxury goods | Louis Vuitton Moët Hennessy, Kering and Dior |
| 4 | Shipping | ZIM Integrated Shipping |
What is the return of stocks in 2023?
Year-to-date, the index was up 6.84% (7.11%), as the 2023 return was up 24.23% (26.29%), making up for 2022's 19.44% decline; the one-year return was 28.36% (30.45%). The index was up 50.50% (60.64%) from its pre-COVID-19 Feb. 19, 2020, closing high.
Stock prices have surged significantly over the past 18 months. The S&P 500 is up by 45% since it bottomed out in October 2022, while the tech-heavy Nasdaq has soared by a whopping 58% in that time. Investing now, then, means paying much higher prices than you would if you'd bought a year or two ago.
- Coinbase.
- Nvidia.
- DraftKings DKNG.
- Meta Platforms META.
- Palantir Technologies PLTR.
For years, a commonly cited rule of thumb has helped simplify asset allocation. According to this principle, individuals should hold a percentage of stocks equal to 100 minus their age. So, for a typical 60-year-old, 40% of the portfolio should be equities.
If you're 70, you should keep 30% of your portfolio in stocks. However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age.
Near and current retirees are often encouraged to invest their money so it's able to grow. If you're 65, it means you may want to keep a notable portion of your portfolio in safer assets. It can still make a lot of sense for a 65-year-old to own stocks.
| S.No. | Company | Industry/Sector |
|---|---|---|
| 1. | Tata Consultancy Services Ltd | IT - Software |
| 2. | Infosys Ltd | IT - Software |
| 3. | Hindustan Unilever Ltd | FMCG |
| 4. | Reliance Industries Ltd | Refineries |
S&P 500 could hit 6,500 by end-2025, says Capital Economics.
U.S. stock returns: 2023 optimism carries forward
This heightened optimism is on par with the positive outlook in December 2021, when investors anticipated a 6% stock market return for 2022. Investor expectations for stock returns over the long run (defined as the next 10 years) rose slightly to 7.2%.
So, with these five bullish factors at play, I believe 2024 will be a good year for equities, and for stock pickers in particular, as investor focus moves to new and interesting parts of the market.
How long will stocks stay in a bear market?
The duration of bear markets can vary, but on average, they last approximately 289 days, equivalent to around nine and a half months. It's important to note that there's no way to predict the timing of a bear market with complete certainty, and history shows that the average bear market length can vary significantly.
After a spectacular 2023, stocks are off to the races again in 2024. YTD, the Dow is up 2.72%, the S&P is up 7.28%, and the Nasdaq is up 6.41%.
What stock did Warren Buffett recently buy? Buffett bought shares of Chevron, Occidental Petroleum, and Sirius XM Holdings in the fourth quarter of 2023.
| S.No. | Name | 1Yr return % |
|---|---|---|
| 1. | Swadeshi Polytex | 466.93 |
| 2. | Remedium Life | 147.17 |
| 3. | Cons. Finvest | 129.15 |
| 4. | Crest Ventures | 135.58 |
Although old-guard favorites such as American Express (AXP) and Coca-Cola (KO) still form the core of the portfolio, Buffett & Co. have taken a shine to names such as Apple (AAPL) and Amazon.com (AMZN), and even to lesser-known firms such as Snowflake (SNOW) and Nu Holdings (NU).
