Fourth quarter rally caps stellar year for financial markets

Market Review From the Westmount Investment Team

11 January 2024

Investors fared well in 2023—very well. The financial markets delivered substantial gains that were experienced across nearly all major asset categories. Following their poor performance in 2022, markets reacted favorably to the likelihood that the Federal Reserve Bank’s aggressive tightening of interest rates has come to an end, notably without pushing the economy into a recession as nearly every economist and market pundit had incorrectly predicted.

Stocks led the way in 2023, with the leading index of U.S. and foreign stocks surging 22.2%. Within equities, large U.S. companies in general–and technology stocks in particular–enjoyed the largest gains, supported in part by investor excitement around artificial intelligence.

On the more conservative end of the spectrum, bonds also rallied back, rising 5.5%, following their dismal and unprecedented -13% decline in 2022.

Last, but not least, alternative assets also rose in 2023, with the index gaining 4.4%. When considering the performance of alternatives as a group, it’s important to remember that alternatives as a category encompass an extremely wide range of asset classes and strategies, and the modest return of the index masks the strong returns of many alternative segments, including those owned in Westmount client portfolios.

Westmount clients fully participated in the strong market performance of 2023. In fact, as the chart below shows, client portfolios outperformed the market benchmarks in each major asset category, net of all fees.

2024 Outlook

The strong returns seen in 2023 temper to some degree our expectations for 2024. Stocks are unlikely to repeat such strong performance, absent the most favorable scenario for the economy in terms of growth rates and employment. Though the U.S. economy is in solid shape as we start the year, consumer spending is the predominant driver of our economy, and consumers are not in as strong a position as they were a year earlier.

Bonds, though, could fare well, as income yields are now at respectable levels following a full decade of meager yields and could also benefit from price appreciation should interest rates fall during the year.

Finally, we continue to see attractive return potential in a number of alternative asset strategies, some of which are more income-oriented, while others are more growth-oriented.

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This report was prepared by Westmount Partners, LLC (“Westmount”). Westmount is registered as an investment advisor with the U.S. Securities and Exchange Commission. The information contained in this report was prepared using sources that Westmount believes are reliable, but Westmount does not guarantee its accuracy. The information reflects subjective judgments, assumptions and Westmount’s opinion on the date made and may change without notice. Westmount undertakes no obligation to update this information. It is for information purposes only and should not be used or construed as investment, legal or tax advice, nor as an offer to sell or a solicitation of an offer to buy any security. No part of this report may be copied in any form, by any means, or redistributed, published, circulated or commercially exploited in any manner without Westmount’s prior written consent.

Performance figures shown include the reinvestment of dividends and are net of all investment costs, including Westmount’s advisory fee. The performance figures above reflect the deduction of a 0.58% fee charged by Westmount, which represents the current average blended fee rate of Westmount’s aggregate clientele at this time. That blended fee rate varies over time, and in some periods has been higher or lower than the fee rate reflected in this report. Clients may have a higher or lower rate depending on their portfolio. Westmount’s fees are described in Part 2 of our Form ADV, which is available upon request.

The market indices shown are provided to assist clients in evaluating Westmount’s performance relative to the markets in which we invest. You cannot invest directly in an index. Westmount’s portfolios are not intended to perfectly mirror the relevant indices, may have more or less volatility than the indices, and may invest in markets and strategies not represented by any of the indices shown. The indices are unmanaged and do not carry fees or expenses.

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