Market Update | December 15, 2023

If the stock market were to have a tagline for 2023, it might be “Saving the Best for Last.” Broad U.S. stock market indexes surged to their highs of 2023 this week. The indexes reached the same impressive levels last seen in Q1 2022 before last year’s drag lower. As for the often-cited Dow Jones Industrial Average index of 30 blue-chip companies, it hit fresh all-time highs this week.

An incredible bounce from late October has seen stocks jump higher. Commentators point towards strong economic data and the Federal Reserve’s outlook about three possible interest rate cuts in 2024 as justifying the momentum. After investors were battered by the Fed’s rate increases in 2022, the Fed’s forecasts lifted hopes that the economy will slow just enough for rate cuts, but not enough to tip into recession.

Insofar as bond investments and yields are concerned, the 10-year Treasury note yield dropped below 4% for the first time since August as bond traders mounted bets on rate cuts for 2024. This is good news for borrowers, but it implies that conservative investments like money market funds and some bonds that are yielding above 5% might not always do so.

Will the best of 2023’s markets stick around until the very end of the year? Will interest rates fall just as the Fed expects next year? We will have to wait to find out. In the meantime, we wish you and your family an enjoyable conclusion to 2023: the best for last, whatever that might mean to you.

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