What The Wealth

Defying Predictions: The Surprising Strength of the Stock Market in 2023 and How to Proceed in 2024 (90)

• Jonathan Bednar II, CFP • Episode 90

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Who could have predicted the ironclad resilience of the stock market amidst the tumultuous events of 2023? In this episode I peel back the curtain on a year where, against all odds, the market leaped in the face of dire predictions, rate hikes, and global instability. 

A few of my thoughts on the reasons behind this defiance of expectations, along with historical patterns that challenge the myth of boom-and-bust cycles. Plus, get a clear understanding of why holding steady in your investments might just be your ticket to financial success.

Navigating the sea of financial advice can be as perplexing as the markets themselves, but I'm here to guide you through the fog. 

Remember, the wisdom shared in this journey is for broad strokes—when it's your personal portfolio on the line, nothing compares to the expertise of a Certified Financial Professional®. 

Tune in and arm yourself with the knowledge to sail confidently through the ever-shifting tides of the financial world.

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Thanks for Listening!

Jonathan

Speaker 1:

Hello 2024. Welcome back to what the Wealth podcast. This is your host, jonathan Bedner, certified Financial Planner and owner of Paradigm Wealth Partners in Knoxville, tennessee. It is amazing really how truly time flies. It seems like just yesterday it was 2020 and people were talking about this throwback to the 1920s and this new kind of vision and era, and how quickly did our worlds get turned upside down. But time has flown and we have experienced a great ride through 2020 and 2021.

Speaker 1:

As it relates to the market, and it's been two years since the market's been at an all-time high. As of this recording and 2022, the Fed raised rate really aggressively to try to combat inflation and they did a good job. I think we actually have managed to have a soft landing and avoid a major recession. Obviously, time will still tell, but so far I think the federal government, the Fed, has done a pretty good job of maintaining that. But what I want to point out is at the end of 2022, at the height of these rate hikes going from zero to five percent, it was a lot of predictions made by financial pundits, experts, big-time money managers, people in the media all predicting that 2023 was going to be bad, that we were going to see continued downturn of the market. 2022, as you recall, the market was down about 25 percent and the prediction at the end of 2022, going into 2023, was it's going to get worse from here. A recession is coming, there's no way to avoid it and things are going to get really bad and, in fact, most pundits again protected this. So it was a time that became very trying for people to determine what am I going to do? Am I going to sell out? Am I going to flee the market, bury my head in the sand and just hope that one day this will pass? Or am I going to lace up my boots and fight through this and continue to power through?

Speaker 1:

And when we go back and we look at where this market went in 2023, it is amazing. So we had a little mini financial banking crisis. We had several banks that go to funk and were taken over by the FDIC, went out of business. We have had continued war with Ukraine and Russia and we've had now a new war that started on October between Israel and Hamas. And 2022. I think when you look at those things and someone said here's, three major headlines are going to happen, four really we're going to continue to raise rates. We're going to have continued war between Russia and Ukraine, we're going to have a new war with Israel and Hamas and, on top of that, we're going to have a handful of banks in the United States fail.

Speaker 1:

If those headlines were just read to you, would you think the market would be up or down? Everybody would think that the market would be down way. If you hear those headlines, you could think no big deal. The market shakes it off and the market's going to go higher, and when we look at 2023, that's exactly what happened, which makes my point that it is almost impossible to predict what's going to happen in the stock market. When I say stock market, the S&P 500, the Dow Jones, these broad-based market indices the S&P 500 was up 26.29 percent, the Dow Jones was up 16.18 percent, us small caps were up 18.43 percent, international developed was up 17.9 percent and international emerging market were up 9.85 percent. Us aggregate bonds were up 5.77 percent and US government bonds were up 4.46 percent. That's incredible in the face of these four doom and gloom scenarios that happened or continued to play out throughout 2023. And so when you see the market look past that and actually have a phenomenal year, it's really inspiring and continues to prove the point again that it's really hard to predict what's going to happen in this market. All of those returns came from S&P Global, which puts out some of this information around around these indexes, and if you want to see them for yourself, sure you can go to S&Pglobalcom and see those again. It's just really amazing to see where the economy's come, how it has continued to reach out not quite to new highs yet, but really close to new highs the new highs that we haven't seen since 2021. So we're really close, and what I found interesting Was it since 1928, the index's average annual performance, following a 20% plus yearly gain, was positive 6.7% and positive outcome 68% of the time.

Speaker 1:

A lot of people might look at the market and say we had a big gain in 2023,. There's no way it can be positive again in 2024. So we'll just sell everything, we'll go to cash, we'll wait for a crash. People think this way because we think it's too good to be true. It's too good to keep going, and this source from Beespoke actually got this from a mutual fund company, mfs Investments, and the source of this was Beespoke. But it's just interesting to see.

Speaker 1:

Since 1928, if you have a year that's up 20 plus percent 68% of the time it's positive and the average the following year and the average is up 6.7%. I think that's really powerful to show that just because you have a big year in the market doesn't mean the market can't keep going. It can, and oftentimes we do see it keep going with the start or the continuation of a bull market in the investment. So I don't know where the year goes. For the rest of the year, I don't want to make guesses or assumptions. What I fundamentally believe is that the market will continue to be volatile. The roller coaster will go up and down and if you are a long-term investor, you will be rewarded for staying the course, holding on to your investments, making sound investment decisions and letting the market go through the ups and downs. History tells us the market's on our side and we will see that money continue to grow and compound for your dreams and your objectives and your retirement.

Speaker 1:

So just want to hop on here with a quick intro to 2024, a quick recap on 2023, and then some thoughts around what happens going forward. So I appreciate you listening, be confident in your retirement and have a wonderful day. Thanks for joining me on another episode of what the Wealth. If you enjoyed the episode today, smash that subscribe button. It helps me more than you think. Also, if you found this episode insightful and a light bulb went off, share it your friend, aunt Judy, the random guy in the office who's always talking about investments. Wealth isn't about just the chain. It's about our choices, chances and changing our financial futures.

Speaker 1:

The information in this podcast is informational and general in nature and does not take into consideration the listener's personal circumstances. This podcast does not intend to be substituted for specific and financial, legal or tax advice. You should consult the approved qualified professional prior to making a final decision. Securities offered through LPL Financial member. Finra SIPC. Paradigm Wealth Partners is the other business name for Independent Advisor Alliance. Investment advice offered through Independent Advisor Alliance or Registered Investment Advisor. Independent Advisor Alliance and Paradigm Wealth Partners are separate ideas for LPL Financial.