Stocks And Bonds Are Ending The Year On A Sparkling High

Stocks And Bonds Are Ending The Year On A Sparkling High
Stéphane Renevier, CFA

about 2 months ago2 mins

What’s going on here?

The global economy proved its worth this year, with stocks and bonds defying expectations to finish on a glittering high.

What does this mean?

A recession seemed a sure bet for much of this year, but the economy has held its own – so far, at least. That’s mainly thanks to three factors: US consumers leant on their pandemic savings, companies locked in long-term loans during the pandemic, and governments spared no expense implementing economy-supporting stimulus packages. Limber supply chains, cheap commodities, and a weakening housing market helped push inflation down toward the Federal Reserve’s (the Fed) target, too. That helped stocks hold steadier than expected, while the AI frenzy did major favors for US tech stocks. Mind you, it’s not just stocks that are making investors breath a sign of relief: US corporate bonds and gold pulled in returns of almost 10%, and bitcoin’s up some 150%.

US inflation
Source: Statista, Bureau of Labor Statistics

Why should I care?

For markets: There’s a reason it’s tough to beat the market.

Investors banked on stocks rocketing in 2022 and crashing in 2023. Both times, they were wrong. That’s a lesson worth learning: the market has a habit of humbling investors, mainly because the consensus expectations have already been priced into asset prices. Bear that in mind when you’re watching the current uptick in stocks and bonds, a result of investors expecting the Fed to cut rates sooner rather than later.

S&P 500
Source: Google Finance

For you: Remember your highs and lows.

New Year’s resolutions aren’t just for planning gym workouts and career moves. The end of a year allows investors to take stock of how their investments played out and why: poor timing, lack of research, emotional decision-making, or unforeseen circumstances are common reasons. It helps to document your investing decisions and rationale as you go, building out something of an investment journal that allows you to hone your process over time.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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