Market Commentary Q4 | 2023
The final quarter of 2023 brought a welcome relief rally for investors, capping off a strong calendar year return for risk assets. After the slight reality check in the 3rd quarter, growing excitement that central banks may cut interest rates sooner in 2024 than previously expected resulted in a risk-on rally. The S&P 500 returned 11.7% in the 4th quarter and over 26% for the calendar year. Global aggregate bonds returned 8.1% over the 4th quarter and 5.7% for the calendar year. Disinflation continued to progress across the globe, leading central banks to step down their hawkish rhetoric. At the same time, economic growth has continued to grow at an above consensus rate and labor markets remain in a healthy position. Recent market performance clearly reflects an increased probability of a soft landing, but risks remain with respect to labor market rebalancing and continued disinflation. Current market valuations leave risk assets more vulnerable should rate cuts be delayed or growth falter, so remaining diversified is crucial at this point.