Market Outlook


2023 Recap


The stock market in 2023 surprised many with a strong upward trajectory, defying initial fears of a recession and high inflation. The year began with worries about inflation and a possible recession, hangover effects from the 2022 bear market. Easing inflation and a stronger-than-expected economy played a key role in the bull run. Big tech companies including Nvidia, Google, Apple, Amazon, and Microsoft led the pack, fueled by expectations of multiple Fed rate cuts in 2024 and the burgeoning field of artificial intelligence. A brief dip in the summer due to concerns about slowing economic growth. From November onwards, the market rallied, buoyed by positive economic data, a dovish Fed outlook, and increased appetite for risk assets.




2024 presents its own set of challenges, with questions about the Fed’s ability to control inflation and the potential for a delayed recession still lingering. The Fed expects to make three rate cuts in 2024 of 75 basis points starting in the second half of the year, while the market expects six rate cuts of 150 basis points starting in May. Economic and earnings data continues to come in strong, buoyed by the labor market. While inflation has come down dramatically from the 2022 highs there remains sticky pockets of inflation (services/labor), which could keep the Federal Reserve in their higher for longer outlook and dampen market enthusiasm. If inflation continues to cool and the economy shows signs of slowing down, the Federal Reserve could cut rates more in line with market expectations, which would benefit stocks and fixed income.


Corporate earnings are equally as important. Currently there are greater expectations from last year’s 3.1% growth to 11.1% growth in 2024. S&P 500 earnings per share (EPS) estimates are between $245 to $250 for the year. The forward multiple is currently at 20 times estimated earnings, which is above historical levels. We are reviewing small and midcap companies that are trading under historical valuations, which could potentially benefit from a lower interest rate environment and earnings growth.


Fixed Income continues to remain attractive, with short and medium term interest rates being much higher than the previous 15 years. As rates start to come back down with inflation normalizing, current higher-yielding bonds will trade at a premium, allowing the potential for greater portfolio returns than just collecting the interest and dividends. We have taken advantage of opportunities in Private Credit, Treasuries, Preferred Stock, and Collateralized Loan Obligations (CLOs) in the higher interest rate environment.


Emerging Markets (EM) bounced back in 2023 after a challenging few years. EM countries have young populations, a rising middle class, and rapidly expanding economies. EM central banks were early to hike interest rates to fight inflation and are now in the process of cutting rates, which is ahead of developed markets. Valuations remain attractive with discounts between 30-40% of developed market valuations. We continue to see significant opportunities in India, Mexico, and Brazil while China continues to face challenges.


Alternatives – We are excited with our existing private equity and alternative investments, which includes Cell Towers, Data Centers, Industrial Warehousing, Opportunity Zones, and Quick Serve Restaurants. We added new investments in Oil and Gas Drilling, Short Term Vacation Rentals, and stay tuned for more information on a direct Infrastructure investment in India.