Market Commentary: Q4 2023

Woman looking ahead toward mountain

As we welcome the New Year, it’s a perfect moment to reflect on the journey of the past year and anticipate what’s ahead. The final months of 2023 brought us a mix of surprises and steady growth in the financial world. We’ve seen how businesses adapted, new opportunities emerged, and communities came together in resilience. In this update, we’ll share a simpler look at the main events that shaped the year, aiming to give you a clear picture without the jargon. 

Economic Resiliency

2023 was a year that seemed to defy expectations by many accounts. A number of economists discussed the possibility of a recession in 2023 as the Federal Reserve raised interest rates to fight high inflation. But the economy remained resilient, inflation eased, and the Fed declined to lift rates later in the year. US stocks rose in 2023, despite some setbacks along the way (Chart 1). Those economists who called for a recession have since walked back their predictions, underscoring that guessing where markets may be headed is not a reliable way to invest.

Chart 1: MSCI All Country World Index in 2023

Past performance does not guarantee future results.

US inflation continued to decline from June 2022’s four-decade high of 9.1%, with the 12-month rise in consumer prices falling to just 3.1% in November. After raising rates three times in the year’s first half, the Fed made only one additional increase later in 2023. Policymakers indicated they will likely continue to hold interest rates steady, despite inflation remaining above its 2% target. Even while the broad economy remained strong, some sectors, such as real estate and finance, lagged. Higher interest rates dampened home sales and new development activity. In the financial sector, the rapid rate increases in early 2023 left some regional bank lenders, such as Silicon Valley Bank, in difficult financial positions. Many nervous depositors withdrew their cash, resulting in three of the largest bank failures on record. 

In Washington, politicians debated the US debt ceiling and government funding. The President and Congress eventually agreed to raise the debt limit in June, avoiding a US default. The US government temporarily averted a shutdown after the House and Senate passed short-term funding deals in September and again in November. The threat of a shutdown may make headlines again if a longer-term funding resolution isn’t reached this year.

Market Summary

Quarter 4 & Year-to-Date 2023 Index Returns

Past performance does not guarantee future results

Invest Where It Really Counts

As we begin 2024, a new set of challenges will likely take shape, but markets are starting the year on good footing. Our team is prepared to weather you through any volatility that may arise so you can invest your time and efforts where it really matters – with your family, your business, your legacy – the people and things that matter most in your life. We thank you for trusting Petersen Hastings Wealth Advisors to help you build a plan that’s right for you. We look forward to seeing you this New Year!