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January 1, 2024
AND THE WINNER IS...WEST CHESTER, PA: Stonecrop's offices are in a beautiful office building in the heart of the borough of West Chester, PA. All of us in West Chester know what a gem it is, but it still came as a shock to see Zillow name West Chester, PA as the most popular market of 2023. Each year, Zillow shares its top ten most popular markets with the public. Last year, Midwest towns dominated. This year, seven of the top ten were in New Hampshire or Connecticut, but West Chester, PA was number one!
SANTA CLAUSE CAME TO TOWN: Stocks closed out the year with their ninth straight week of gains. For the S&P 500, that is the longest such streak since 2004. That index is still lower than its January 2022 high, but not by much. Often year-end rallies are boosted a bit because investors with stocks that have appreciated do not want to create a taxable sale prior to the end of the tax year. And so we ended up getting a year marked by a significant rise in stock prices, and a late-year bond rally. This despite rapidly rising interest rates, a regional banking crisis (remember Silicon Valley Bank?), and war breaking out in the Middle East. The major impetus for the rally, of course, is that all the calls for a recession did not happen. Recall that many, if not most, economists at one time were predicting a slow down to begin in 2023. It did not happen, and a relief rally ensued. Stock prices for most of the year were held up by a few, very large U.S. companies. But in the final quarter of the year, the rally became broad based, and small and midcap stock began to catch up. All eyes will now turn to 2024.
LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.
CHINA'S RECOVERY THAT WASN'T: With the abrupt end to strict COVID-19 rules, China was supposed to enjoy a year of rapid recovery. China's consumer spending disappointed. It has been up an average of 3% per year (before accounting for inflation) since 2019. Consumer spending is about 14% below where it would have been if it grew in line with the pre-pandemic trend. The housing bust that began in 2021 continued, dragging down demand for Chinese industrial commodities. Starts of new homes and sales have plummeted since the middle of 2021, with no signs of recovery. China has responded to these troubling domestic trends by exporting more and more.
CHINA MOVING ITS HOME BUILDING TO...IRAQ?: If there isn't enough domestic demand for new homes in China, its builders will build them somewhere else. Iraq needs development. China needs oil. Voila! China has agreed to 20-year agreement to purchase 100,000 barrels of oil per day, and Iraq will use the money to pay Chinese firms to build lots more homes and schools in what will essentially be over a dozen new cities.
LESS COLLEGE GRADS: According to Pew Research Center, the total number of 18-24-year-olds attending college is down about 1.2 million from the peak in 2011. That decline is mostly men. There are about 1 million less men in college since the peak, and about 200,000 less women. During this stretch of time, the number of high school graduates has increased a little. Men are now down to 44% of all college students according to the Census Bureau.
BOB DOLL'S PREDICTIONS: Bob Doll is the Chief Investment Officer at Crossmark Global Investments, and an oft-featured guest on many of the financial shows on cable television. I have met Bob, and despite a brilliant mind, he is one of the humblest people I have met. As such, he is the perfect person to make predictions because they are backed by a lot of data, analysis, and experience, and they are proclaimed by a man who will readily admit when he gets them wrong. I thought it still might be helpful to take a look at what he is predicting for 2024. Here goes:
A mild recession in the U.S. with unemployment rising above 4.5%.
2-3% inflation becoming the floor for the 2020s instead of the ceiling it was in the 2010s.
The Fed cuts rates fewer than six times.
Credit spreads widen as interest rates decline.
Corporate earnings grow less than double-digits.
Stocks rise to an all time high in the first half of the year, and then fade.
Energy, Financials and Consumer Staples outperform Utilities, Healthcare and Real Estate.
The share of assets being managed by Faith-Based asset managers rises for the eighth year in a row (something we are seeing first hand).
Geopolitical issues get worse but have little market impact.
The White House, Senate, and House all switch parties in November.
HOTELS FINISHING UP A HEALTHY YEAR: Hotels did not have a break out year, but they stayed steady, with occupancy at about the same levels as last year and the 2000 to 2022 median.
UNCERTAINTIES IN THE ELECTRIC VEHICLE INDUSTRY: The Wall Street Journal has been tracking the health of the electric vehicle (EV) industry. Of the companies the WSJ is watching (over 40 such companies), the median stock price has plummeted by more than 80% from their market debuts and even further down from their market peaks. Tens of billions of dollars in market value has been wiped out in a couple of years. Demand is steadily growing, but most or all these companies projected exploding growth. As often happens as markets mature, profits get challenged as Tesla and others cut prices to win and keep customers. Tesla almost went bankrupt five years ago. Three companies, Lordstown Motors, Proterra and Electric Last Mile Solutions, have filed for bankruptcy. Two, Romeo Power and Volta, have sold for much less than their initial public valuations. Of the remaining companies, the Wall Street Journal has concluded that nearly half are projected to run out of cash by the end of 2024.
GOALS: It is that time. What are you going to accomplish in 2024? Two things are very important in this process. One, come up with specific and measurable goals. Second, put in place an accountability structure. Tell someone your goals and give them permission and encouragement to ask you about the goals throughout the year and how you are doing. Without the accountability structure, your likelihood of success is much less. If you are a client, and you want us to be part of that accountability, tell us all of your goals.
CAN'T RESIST: My entire family came with Deb and me to our church's Christmas Eve service. What a blessing indeed! My granddaughter Lydia fell asleep during the service and couldn't quite wake herself enough after the service to pose for this picture. Don't believe my son Riley. He isn't taller than me. He is irreverently standing on the communion kneeler. You can see eleven faces in this picture. There is a twelfth person in the picture, and we will see his or her face any day now. Oh, and my family was embarrassed by the pants I chose to wear (you can see them if you look closely).
Have a great week!
Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.
Douglas R. MacGray, J.D., C.F.P. ®
President
Stonecrop Wealth Advisors, LLC
Direct | Cell | Fax
(610) 628 4545
"Work that matters is often difficult. It can be absorbing in mid-flow and satisfying in retrospect, but it is intimidating and headache-inducing and full of false starts."
Tim Harford of the Financial Times
Whatever you do, work at it will all your heart." Colossians 3:23 (NIV)
SOURCES:
UNCERTAINTIES IN THE ELECTRIC VEHICLE INDUSTRY: https://www.wsj.com/business/autos/electric-vehicle-startups-risk-money-64c8dec2?mod=hp_lead_pos1
BOB DOLL'S PREDICTIONS: https://www.crossmarkglobal.com/wp-content/uploads/10-Predictions-for-2024-Executive-Summary_FINAL.pdf
HOTELS FINISHING UP A HEALTHY YEAR: https://str.com/data-insights/news/press-releases
CHINA'S RECOVERY THAT WASN'T: https://theovershoot.co/p/the-overshoots-2023-year-in-review
CHINA MOVING ITS HOME BUILDING TO...IRAQ?: https://www.zerohedge.com/geopolitical/china-iraq-begin-construction-new-city-near-baghdad
LESS COLLEGE GRADS: https://www.pewresearch.org/short-reads/2023/12/18/fewer-young-men-are-in-college-especially-at-4-year-schools/
AND THE WINNER IS...WEST CHESTER, PA: https://www.msn.com/en-us/money/realestate/zillows-top-10-most-popular-markets-of-2023-shows-swing-to-the-east/ar-AA1m5N6G
*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.
*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.
Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.