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Great Investment Lessons for 2024

Stocks defied the skeptics in a very unpredictable 2023. The Dow Jones finished at an all-time record high on December 28, and the S&P 500 came within a whisker of a fresh all-time high after the index rallied more than 20% for the year.

It wasn’t only stock investors who had plenty to cheer about. Bond portfolios, which struggled mightily along with stocks in 2022, staged a furious late-year rally. Bloomberg’s broad bond market benchmark returned a solid 5.5% for the year after being negative year to date as late as October.

Last year was especially gratifying given the pessimism at the outset. It also offers some important lessons for investors:

• Don’t always follow the herd.

They’re right at times, but wrong more often than you think. As recently as May 2023, Wall Street strategists forecasted 4,017 for the S&P 500 at year end—about 19% too low. Stocks rise about three times as often as they fall, so be wary of bearish herds.

• Consider cycles and trends.

Stocks rarely fall two years in a row. Year three of the four-year presidential cycle (e.g., 2023) has been the best over time. Bear markets tend to recover losses in under a year in the absence of recession (the last bear ended in October 2022). Historical cycle averages point to mid-to-high single-digit gains for stocks in 2024.

• Don’t bet against the U.S. consumer.

Every economic cycle is different, but the post-pandemic recovery distorted the economy such that traditional economic indicators misled many economists. One takeaway here is stimulus matters—for example, low interest rates, stimulus checks, student loan forgiveness, and even infrastructure spending. Another takeaway is that consumers with jobs will spend. The unemployment rate remains near 50-year lows.

• Focus on the long term.

This unusual economic cycle made it extremely difficult to predict where stocks were going, reminding us that “time in the market” is a better mantra than “timing the market.” Waiting it out through the down periods, even through wars, a banking crisis, and widespread calls for recession, is the best approach for nearly all investors.

These are all great lessons to tuck away as we turn to 2024. The year may not bring quite as much joy to your portfolio, but with inflation down, unemployment low, corporate fundamentals in good shape, and the Federal Reserve poised to cut interest rates, the ingredients for another profitable year are in place.

All of us at LPL Financial Research wish you a joyful and prosperous 2024. As always, please reach out to me with questions at john@alliancewealthmgmt.com.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. All index data from FactSet. The Standard & Poors 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. For a list of descriptions of the indexes and economic terms referenced, please visit our website at lplresearch.com/definitions. This research material has been prepared by LPL Financial LLC. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity. Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed Not Bank/Credit Union Deposits or Obligations | May Lose Value


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