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Q4 2023 Market Commentary

January 18, 2024

Global financial markets rallied strongly in the final two months of the year, closing out 2023 with impressive quarterly gains. The S&P 500 index rose 11.69% in Q4 and was up 26.29% in 2023. International equity markets followed suit, with the MSCI EAFE developed markets index gaining 10.47% and 18.85%, and the MSCI Emerging Markets index up 7.93% and 10.27% in Q4 and 2023 respectively.

The US bond market also posted an impressive rally over the final two months of 2023, reversing a significant slide that had taken hold over the middle half of the year. Yields on US Treasury debt fell nearly ¾ of a percent across the maturity spectrum in Q4, causing mortgage interest rates to begin declining after 30-year rates had reached the 8% level for the first time since 2000. The US bond market as measured by the Bloomberg Aggregate US Bond Index posted a gain of 5.53% in 2023, its first positive year since 2020.

Spectacular as gains exceeding 26% on the S&P 500 and 44% on the NASDAQ Composite stock indices appear, a closer look under the hood reveals the broader market wasn’t nearly as strong as the raw numbers suggest. Massive gains in the so-called ‘Magnificent 7’ stocks (Amazon, Apple, Alphabet/Google, Meta/Facebook, Microsoft, Nvidia, Tesla) drove virtually all the index gains over the first three quarters. At mid-year, the other 493 stocks in the S&P 500 index were collectively flat. It wasn’t until November that we saw meaningful participation across the markets, including small company stocks, befitting of a true bull market. It is worth noting that the 30-stock Dow Jones Industrial Average, which is not influenced by the Magnificent 7 stocks nearly as much as the S&P 500 and NASDAQ indexes, did hit a new all-time high on December 13th, as the rest of the market finally participated in the buying frenzy.

Many market observers are also concerned that two full years have passed since the S&P 500 index last posted a new record high, despite having bottomed out less than 25% off its all-time high water mark – mild by bear market standards. And despite the tepid performance of most of the companies that aren’t counted in the Magnificent 7, market valuations relative to corporate profits remain stretched versus historical levels. With all the major leading economic indicators pointing toward recession, investors experiencing FOMO (Fear of Missing Out) should think hard about chasing an already expensive stock market too aggressively.   


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee profit or protect against loss. This presentation may contain forward looking statements and projections; there are no guarantees that these results will be achieved. 

Market data provided by JPMorgan Asset Management and

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.

The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia. The MSCI EM Index consists of the following emerging market country indices: Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Egypt, Greece, Hungary, Poland, Qatar, Russia, South Africa, Turkey, United Arab Emirates, China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

The Bloomberg Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.