2023 Halftime Report

March 14, 2024

We've reached the halfway mark of 2023, and stocks have surprised to the upside.  What should investors expect for the rest of the year?  Let's explore...

The S&P 500 is up by more than 15% at the halfway point of 2023.

So, when the topic of investing comes up at your next summer BBQ, you can quote Greg Focker from Meet The Parents:

But this wasn't supposed to happen.  You heard the narrative; they screamed about inflation, housing market collapse, interest rates, and so on and so on.  It was so abundantly obvious that the market would not perform well this year, as a recession is imminent.  Batten down the hatches....

Oops.  They got it wrong, again.  The allure of 5% growth in cash/money markets pulled many investors away from their long term plans.  They believed "it was safe to wait things out until the market looked better".  It's the same textbook, emotional response that market drops create.  Every. Single. Time.

What to Expect for the 2nd Half of 2023:

Does a strong start lead to a slow 2nd half?  Not at all.  The chart below depicts what happens when the S&P 500 has a strong 1st half, defined by growth of 10%+ going back to 1980.  During 80% of these occurrences, the market also gained money in the 2nd half of the year.  The evidence suggests more market strength should follow.  


Has the Recession Been Cancelled?

The media is certainly pivoting!  Our blog regularly reminds investors to tune out the noise, as the headlines often stray from reality.  As the market continues to rebound, many publications are back-tracking on the Armageddon narrative in an attempt to save face.  Meanwhile, we've used data to support our view that last October was hopefully the market bottom.  Here is some free advice: regardless of the headlines, STAY INVESTED.  Look at these narrative-shifting headlines from major financial media outlets:

Not All Stocks Are the Same

This is why we diversify!  We've seen some wild mood swings over the past two years. While the S&P 500 posted strong 1st half numbers, the Dow Jones wasn't nearly as profitable.  This may be surprising, considering both indices are US stocks.  Well, the Dow Jones is an index comprised of only 30 stocks, while the S&P 500 index has about 500 stocks.  The Dow tends be more defensive than the S&P, and it's risk/reward is much more concentrated.

In 2022, the Dow only lost 8.78%, whereas the S&P lost more than 18%.  Year to date (7/10/23), the Dow is up only 1.8% versus 15.5% for the S&P.  

As investors, often times we will have funds that we love, and others that we hate!  This is a sign a diversification; if you love all of your investment holdings and their recent performance, you're likely exposed to some unforeseen risks.  I believe the Dow & the S&P will eventually converge, so owning funds with exposure to both indices makes complete sense.

Thanks for reading!  Tune out the noise, trust the process, and always be compounding.

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