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The month that was:
The market ended the year strong. In December, the Dow went up by about 4.9%, the S&P 500 went up by about 4.5%, and the Nasdaq went up by about 5.6%. Smaller companies did even better, as the Russell 2000 went up about 12%.
The biggest news of the month came on December 13th. The Fed kept interest rates the same for the third meeting in a row, and it predicted that it would cut interest rates three times in 2024. Just three months earlier, the Fed was still predicting one more rate increase. Fed Chair Jerome Powell said that interest rates are probably at or near their highest point. The market loved this news, and the Dow closed at a record high above 37,000 that day. The Dow hit several more record highs before the end of the year, and the S&P 500 finished the year less than 1% away from its own record.
Looking back at 2023:
At the start of the year, many experts were predicting a recession and expected the market to go down. Instead, the S&P 500 went up about 24% in 2023, and about 26% including dividends. That made up for all of the losses from 2022. The Nasdaq went up about 43%, its best year since 2020, and the Dow went up about 14%. Almost nobody predicted such a good year, which shows why it is so hard to time the market and why it is important to stay invested.
However, most of the gains came from just seven giant tech companies: Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla. Investors call them the "Magnificent Seven." They were responsible for about 62% of the S&P 500's gains this year. Without them, the S&P 500 would have gone up only about 10%. Meanwhile, Dollar General was one of the worst stocks in the S&P 500 this year, falling about 45%.
Here are the most important lessons I learned this year:
1. A cheap stock is not always a good deal. My biggest mistakes this year were Dollar General and Estee Lauder. Both companies lowered their forecasts again and again, and I kept buying because the prices looked cheap. Now I know to wait for the business to stop getting worse before buying more.
2. It is okay to change your mind. When I learned more about Nasdaq's large debt, I sold my shares for a small loss instead of hoping it would work out.
3. Interest rates matter a lot. This year, the market went down when interest rates went up, like in September and October, and it went up when interest rates came down, like in November and December.
4. Stick to high quality companies. Companies with high and consistent profits, growing dividends, and strong businesses are the ones that can survive bank failures, debt ceiling fights, wars, and anything else the market throws at them.
Buys -
Bought 3 ONON at $29.78
I added a few more shares to my position in On Holding, which keeps growing quickly. When interest rates come down next year, I think fast-growing companies like On will do well.
Sells -
None.
Thanks for reading my newsletter, and Happy New Year!