What happened last week
- 2023 set a high bar for 2024 market-wise, although new all-time highs are just a hair away from last week’s closing levels.
- Business cycle analysis frameworks may be leading some investors astray; tune into our quarterly webcast to hear more.
- We are optimistic to start the year due to tailwinds from technological innovation and continued economic strength.
What we’re watching this week
- With liquidity returning, we are monitoring price action to see whether last month’s laggard-led equity rally continues.
- US labor market data takes the spotlight as the last jobs figures of 2023 are released on Friday.
- Outside the US, PMI releases from most major economies will shed a light on diverging global growth trajectories; inflation in Europe is also a focus for central bank policy watches.
Horizon’s Investment Management Views
2023 ended with somewhat of a whimper; although the last two trading weeks were quiet, the full year surely was not. Risk assets roared back to life, sending the S&P 500 up over 26% and the NASDAQ 100 up an astounding 55%; fixed income assets also participated with core bonds up 5.5% and high yield bonds up over 13%. As the new year kicks off with the S&P 500 less than 1% from all-time highs, one question is top of mind for all investors: does the mega-cap behemoth-led rally continue, or does the rest of the market catch up? We are not blindly embracing the laggard parts of the market as we enter 2024, but we are actively looking for opportunities both within the U.S. and internationally.
While it was a great year for risk assets, not all investors were along for the ride. Traditional business cycle analysis led many to believe a recession was around the corner. Many investors decreased risky exposures and plowed more into safe-haven assets like money market mutual funds. We strongly believe that the traditional business cycle ideas are less likely to apply once again, confounding economic forecasters in 2024 as in 2023. Murmurs of recession abound once more, but with a robust labor market, policy headwinds turning to tailwinds, and plenty of buying power on the sidelines, we think that this may be a year in which investors fall out of love with cash and re-engage with long-term investments to power their financial plans.
Shifting to the here and now, the focus for this holiday-shortened trading week is the macro. US labor market data, especially Friday’s non-farm payroll report, in addition to PMI releases from most major economies, are the main data points we are monitoring. Looking forward, December’s CPI report on the 11th and the start of earnings season on the 12th are key events ahead of the Fed meeting at the end of the month.
The commentary in this report is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here are not investment recommendations, but rather opinions that reflect the judgment of Horizon as of the date of the report and are subject to change without notice. Forward looking statements cannot be guaranteed. We do not intend and will not endeavor to provide notice if and when our opinions or actions change. This document does not constitute an offer to sell or a solicitation of an offer to buy any security or product and may not be relied upon in connection with the purchase or sale of any security or device. Before investing, an investor should consider his or her investment goals and risk comfort levels and consult with his or her investment adviser and tax professional. Equities are represented by the S&P 500 Index which is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The NASDAQ 100 Index is a stock market index made up of 100 equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. High-yield bonds are represented by the Bloomberg US Corporate High-Yield Index which measures the USD-denominated, high yield, fixed-rate corporate bond market. Core bonds are represented by the Bloomberg US Aggregate Bond Index which is a broad-based flagship benchmark that measures the investment grade, US dollar- denominated, fixed-rate taxable bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. It covers roughly the small-cap range of American stocks, using a capitalization-weighted index. References to indices, or other measures of relative market performance over a specified period of time are provided for informational purposes only. Reference to an index does not imply that any account will achieve returns, volatility or other results similar to that index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. It is not possible to invest directly in an index. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC.
