Year in Review

2023 began with many economists anticipating a recession. There was an epic bank failure in March, a political showdown over the debt ceiling in June, Hamas terrorist attacks against Israel in October, and ensuing war in the Middle East. All this while war in Ukraine continued. A rather dystopian timeline.

But for investors the most important (and good) news is what did not happen. The bank failures in the spring were idiosyncratic and did not presage a broader financial crisis. The U.S. economy slowed but did not slip into recession. Meanwhile, inflation declined, falling from 6.4% at the start of 2023 to 3.1% at the end. With price pressures abating, the Federal Reserve signaled a pause in its interest rate hikes. These economic conditions, better than expected at the start of the year, buoyed stocks and bonds to solid performance.

Forecasting Season

It wouldn’t be a new year without stock market forecasts. Bartlett has long regarded these seasonal predictions with skepticism, mindful of many swing factors beyond the intuition of even the best and brightest analysts. Indeed, we think market forecasting is like singing. Most people should only do it in the shower, so that no one will hear them. We think 2024, like most years, will evolve in surprising ways for investors, probably featuring a few setbacks. We will stay alert for buying opportunities created by any market distress.

Principles Instead of Predictions

Bartlett was not despondent a year ago in the aftermath of 2022, and we are not exultant today. We know the achievement of your long-term goals requires a methodical approach, grounded in realism rather than optimism or pessimism.  We think the start of a new year is a good time to reiterate our core beliefs. These should keep us composed and pragmatic throughout 2024.

Investing is a marathon, not a sprint

There were two market selloffs in 2023, during the spring and fall. Recent times have included memorably negative years in 2022 and 2008. Despite occasional setbacks, stocks have provided marvelous long-term wealth creation, amply rewarding the fortitude of disciplined investors.

Patiently own great companies

Over the long haul, stock prices have paralleled the rising corporate profits and dividends achieved by successful companies. These growth factors are important in our assessment of businesses. We place our trust in leading companies that provide vital goods and services.

“Time in the Market” is more important than “Market Timing”

Occasional turbulence makes “market timing” seductive for many investors. However, it is unreliable because the timer usually sells when declines are underway and repurchases later when prices are higher. Many reputable studies have demonstrated the futility of timing. Wealth is built by owning, not by trading.

Be careful about investment valuation

It takes a 25% gain to be fully restored after a 20% decline. However, a 75% rebound following a 60% decline leaves an investor with just 70% of original capital. This is very daunting math for investors who forget about risk.

Be prudently diversified

We think this is a timely reminder following a year in which stock performance was dominated by a narrow cohort of companies in just one business sector (technology). Such concentrated market conditions can tempt “performance chasing” as investors focus on exalted winners and ignore diversification. This usually ends in sorrow.

Be disciplined in asset allocation

Market declines exact a lasting penalty on those forced to sell stocks at lower prices. Less volatile assets – such as cash, bonds, and alternatives – help protect against this risk. Portfolios should be rebalanced periodically, based on asset allocation guidelines. This helps assure that market setbacks will not disrupt a sound financial plan. 

The stock market is neither red nor blue

This final principle is especially important in an election year. Economic prosperity is the foundation of sustained investment success. Neither of our major political parties has had a monopoly on economic progress. Businesses flourished during the Eisenhower and Reagan presidencies just as they thrived under Johnson and Clinton.

Good News

Bartlett was once again named a Top 100 Registered Investment Advisor by both Barron’s and Forbes. While pleased by this recognition, we are not resting on our laurels. At a time when many firms are downsizing, we added ten professionals in the last year. These are the next generation of leaders who will keep Bartlett at the forefront of wealth management.

Concluding Comments

We are pleased to report that Bartlett achieved 98% client retention in 2023 and welcomed many new clients. These results were made possible by your loyalty and trust. We are always grateful when you recommend Bartlett to family, friends, and associates who could benefit from our services. Also mention us if you meet an enterprising CFA® or CFP® who is looking for a great place to work! Finally, we recently completed an update of our website and we hope you like the enhancements.

DISCLOSURE

This material provided by Bartlett Wealth Management (“Bartlett”) is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Nothing in these materials is intended to serve as personalized tax and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Past performance is not a guarantee of future results. Opinions expressed by Bartlett are based on economic or market conditions at the time this material was written; actual economic or market events may turn out differently than anticipated.  Facts presented have been obtained from sources believed to be reliable.  Bartlett, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.  Any reference to an index is included for illustrative purposes only.  Indices are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. Bartlett does not pay a fee to Barron’s or Forbes to be considered in their Top 100 Registered Investment Advisors.