Another year in the books, and oh boy, as I’m just getting used to writing 23’ when dating my checks, I’ll need to reorient to 2024. Admittedly, I still have the habit of wanting to write 2004 (Go Red Sox!!), but that’s a whole different story. Each December, I like to do a recap, review some trends I witnessed in the financial world, and share some thoughts and insights. So, for this 2023 recap, you can get my two cents on financial matters because, as a family financial planner in Greater Boston, I feel I have something different to offer than all those talking heads on the Bloomberg channel.
2023 Recap – The Big Stories
Inflation Trends
The biggest question mark heading into 2023 was whether inflation could be settled down and whether the Fed’s interest hikes would curb the trend. While inflation is still atop everyone’s minds, it has been slowed substantially. The gridlock of supply chain issues for consumer goods has been mostly cleared, and energy commodities have decreased in price. Overall, the CPI for the year is 3.1%, which is respectable, particularly considering where it had been in previous years coming out of the pandemic, and the national unemployment rate is 3.7%.
While I cannot say or predict whether or not a recession has fully been avoided or something has been kicked down the road, 2023 was certainly not the doomsday disaster that some had been predicting coming out of 2022. One term that every pundit loves using regarding pandemic recovery/inflation is “soft landing.” We’ll see if that hot term lasts into 2024.
Credit Addiction
2023 was the year American credit card debt hit the 1 trillion mark; yes, that trillion with a T. In our plastic/digital economy, more and more people rely on credit cards for convenience and buy now/pay later motto than in previous decades. Now, if you’ve read my other articles, you know I’m not one to tell you to skip the pleasures in life, but there’s a difference between not skipping the coffee and putting a $4 coffee onto a credit card with 29% APR and letting it become a $42 coffee!
I think much of this debt comes from younger generations not receiving basic financial education. When I was growing up, credit cards were something to be taken seriously and only earned/used after understanding the risks; today, perhaps those warnings are lost on many.
The Stock Market
There were lots of ups and downs along with bullish and bearish trends in the stock market in 2023; however, the market is finishing on the up and up despite global conflicts and housing market uncertainties. Crypto made a resurgence, and so did the cruise line industry( yea that one surprised me too)
Many sought to take advantage of the high interest rates and removed money from the stock market (amidst typical panicked motivations), placing funds into bank accounts. Still, these were low-yield accounts. While looking for stock alternatives, I believe they should have been looking for cash alternatives, not stock alternatives.
What does all that mean exactly? People who sold stocks to capitalize on the high-interest rates lost out on the stock market rebound. Savvy investors took from low-yield bank accounts and found advantageous “cash alternatives.”
The stock market moves on fear in the short term, and long-term performance is based on data. Short-term predictions aren’t worth diddly. We can look at trends and make predictions for years and decades based on historical data, but whoever claims they have a crystal ball for the coming six months is selling something not worth buying.
Housing
The housing market is still a difficult place for many families. It’s difficult to enter the market as a first-time buyer, and it’s hard to upgrade/scale as homeowners want to sell. The mortgage rates are still too high for many, and it just doesn’t make sense to sacrifice lower interest rates in favor of higher ones to scale up homes. While the pricing has come down some, the housing market is still lean, competitive, and difficult. We’ll see what 2024 has to offer on that front. Recently, new legislation was introduced into the House and Senate to prohibit hedge funds from purchasing single-family homes, and they could impact the market depending on whether or not it is signed into law.
2024 is an Election Year
Looking to 2024, I can already tell you that there will be many “hot takes” on how the economy will go during the election year cycle. I will say this: historically, it is shortsighted to think an election cycle will change the market. Even as it’s a presidential election year, the effects of the election are not felt by the market until usually a year or two into the new President’s term, not with speculation beforehand.
I’ll always reiterate this: a strong foundation and confident long-term plan are the best ways to avoid short-term panic, fear, and financial vulnerabilities that inevitably present themselves year after year. Making many small and smart choices over time will have a greater impact than chasing big “game-changing” choices in the near term. Every year will have its ups and downs, but with a course heading and a helpful guiding hand, the horizon can always be in sight, even during the most turbulent times.
I hope you had a great 2023, and If you’d like to see what options are available to you for 2024 and beyond, please reach out.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All investing involves risk, including loss of principal. No strategy assures success or protects against loss.
