What Happens 132 Years Later?

End of 2023: DJIA 37,690; S&P 500 4770

3/5/24 – Previous Close: DJIA 38,585; S&P 500 5079

After a disappointing and painful 2022, 2023 was a welcome relief – even better than I expected. The major U.S. stock indices were nicely positive and (finally) most bonds had a positive return. Although the Artificial Intelligence (AI)-related, mega-cap tech stocks were by far the leaders in 2023, most other stocks posted nice returns as well. The Dow Jones Industrial Average (DJIA) was +16.2%, the S&P 500 (with its dominance in the afore-mentioned AI tech mega-cap tech companies) was +26.3%, and the Bloomberg U.S. Aggregate Bond Index was +5.5% -- all clearly a nice rebound from 2022’s carnage.

“But Herb, what about 2024?!” While my “crystal ball” remains imperfect, I do have a few thoughts on the 12 months of market action that will constitute 2024. First and foremost, it will be volatile and unpredictable. I expect there to be prolonged periods (weeks/months) of positive returns as well as prolonged periods that will not be as fun (known as “fear waves”).

Presidential election years usually garner much attention and angst from investors (and the media!). They wonder (with good reason) what the policy implications will be for the next four years under the next administration and Congressional makeup. I expect this to be true but even more so. While there have been certain market patterns that have generally held true in most Presidential election years, 2024 appears to be headed towards an election scenario that has not occurred since 1892! In 1884, Grover Cleveland became President of the United States. Four years later, he lost his reelection bid to Benjamin Harrison. Then in 1892, he ran for the Presidency again (against Harrison) – marking the first and only time in U.S. history that a former and defeated President ran for reelection. Not in 132 years has the economy and stock market had to contend with the unique uncertainties such an election presented – until now.

Here are a few things that I think are likely to play out over the next 12 months:

  • The U.S. economy remains resilient and avoids recession in 2024.
  • Inflation and interest rates decline but not to the levels seen a few years ago.
  • Geopolitical issues continue to be growing problems – both here and abroad.
  • Both the stock and bond markets have positive returns, with equities returning more than fixed income. The returns for both may be less than I had earlier expected to occur in 2024 as Q4 of 2023 likely “pulled forward” some of the returns from 2024 (i.e. the market may have gotten ahead of itself…).
  • Our “Five-year Rule” should continue to help our clients reap the benefits of long-term investing. [An article describing this is available on our website (www.hlormond.com) or upon request.]

So how should investors prepare for 2024 (and its “not in 132 years” scenario)? Long-time readers will recognize my two best pieces of advice:

  1. Abide by “Herb’s Three Rules of Equity Investing”own quality, be diversified, and invest in patience.
  2. Remember that “Investors must always be prepared – financially, mentally and emotionally for at least a 10% correction at any time.”

As always, ignore the gloom and doom media AND if your financial picture changes, let us know so we can adapt accordingly.

Regardless of what happens in the next 132 years, the next 12 months should be interesting!!!

L. Ormond & Company, LLC (“HLO”) is a Registered Investment Adviser. HLO offers advisory services only to clients or prospective clients where HLO and its representatives are properly licensed or exempt from licensure.

This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of HLO and are subject to change without notice based on market and other conditions. Diversification does not assure a profit or protect against a loss. Keep in mind that individuals cannot invest directly in any index. Individual investor’s results will vary. Past performance does not guarantee future results.

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The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 22 developed nations. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index.

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