Yes it is a weird picture. I asked ChatGPT to make an image about 2023 flying by and that's what I got. It's not too great with numbers just yet.
2023 is no more. It was a year filled with Taylor Swift, artificial intelligence, Stanley tumblers, bank failures, war in Israel, and global financial markets recovering.
While 2022 is a distant memory at this point, it was tumultuous year for financial markets. It was the first year in recorded history where both US equities and US bonds clocked double digit percentage losses at the same time.
When I wrote my review of 2022, I decided a good message looking forward was one I borrowed from Nick Murray that “optimism is the only realism”.
Of course, what happened at the beginning of 2023? We saw 3 of the largest 4 bank failures in the history of the United States. Things started to look grim for a brief moment. Did I advise clients to panic sell and move out of equities? No. I suggested we stay course with the existing allocations.
Most people forgot all about those bank failures by the end of 2023, but for a hot minute many people were wondering if it would spiral into a full-blown financial crisis. The crisis was avoided, and markets ripped higher.
What 2023 brought in terms of financial markets was quite the opposite of 2022. It would have served many investors well to remain optimistic after the down year of 2022. Market history does not tell us what future market performance will be, but it gives us hope knowing equity markets have been incredibly resilient.
Here are the proxies used for each category: US equities = Vanguard Total Market Index (VTSAX), World Ex-US equities = Vanguard Total Intl Stock Index (VTIAX), US Bonds = Vanguard Total Bond Market Index (VBTLX), US Small Cap Value = Avantis US Small Cap Value ETF (AVUV), International Small Cap Value = Avantis International Small Cap Value ETF (AVDV). Disclosure: Meredith Wealth Planning uses some of these funds in constructing portfolios.
Would you have bought equities had I told you at the end of 2022 we would see 3 of the largest bank failures of all time? Probably not, but you should have.
Would you have been optimistic about owning equities after the October 7th attack on Israel? Probably not, but November of 2023 was the 18th best month in the history of the S&P 500 index.
We will celebrate the 5-year anniversary of Meredith Wealth Planning in March of 2024. Time flies when you’re having fun.
Our assets under advice grew from $190 million at the end of 2022 to nearly $265 million at the end of 2023 with around 170 – 180 client households.
There will be no increase to our annual advisory fee this year. Our maximum advisory fee of $6,000 a year is still lower than the first year we were open (previously $6,750), and cumulative inflation has eroded the value of the dollar by over 20% since 2019 so in real terms our advice has gotten much cheaper. This during a time which global equities rose over 70% (from 2019-2023 as measured by the Vanguard Total World Stock ETF).
An advisor working off a percentage of client assets would have seen very lucrative revenue increases during the time, for likely no increased work, and for merely riding the coattails of global equities. This is one of the many issues with that model (although those on the receiving end of that would refer to it as a perk).
We will raise our advisory fee again someday and you will be notified in advance, but I am intrigued by the fact that Costco’s hot dog combo has remained at a $1.50 price point since 1984. Unfortunately, we are not Costco and cannot maintain our current rate for several decades.
One highlight of 2023 was visiting the New York Stock Exchange for an educational session put on by Avantis Investors. It was great to finally meet their Chief Investment Officer, Eduardo Repetto, in person and get deep in the weeds on portfolio construction. Here are him and I in front of the opening bell.
Last year I wrote how our family grew from the birth of our son, Bodie, in May of 2022. The family is growing again, with our 4thchild expected to join us in April.
My dear wife, Rebecca, has also made the leap to becoming a business owner in starting Enlightened Pelvic Health. When we tied the knot in 2012, I would not have guessed that we would both one day become business owners, but it is an incredible blessing we’ve been able to do so. She has just what every business owner needs, the passion for her work.
Here's our Halloween as the Addams Family:
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Eventually the recession predictions kept getting pushed back so far that I think they eventually stopped predicting one.
The only recession I noticed in 2023 was in my hairline. It is hard to imagine we were in a recession when Taylor Swift tickets were going for $50,000 and her tour did over $2 billion of revenue (I thought Napster killed the music industry!).
Did we have an economic recession? Maybe, maybe not. The National Bureau of Economic Research (NBER) never declared one. Had they done so, would it have changed our lives much? I have no idea. Maybe businesses would have become scared and cut staff or capital investments. All of that is hard to predict, and fairly pointless to try.
I know had there been a recession, my advice would have been to maintain your existing portfolio allocation. Just like the beginning of a recession cannot be predicted, the middle or ending of it cannot be predicted.
Avantis Investors shared in their September 2022 Monthly Field Guide that market returns in the second half of an economic recession are higher than in either half of an economic expansion!
A recession can be a wonderful time to invest.
As always, no one knows anything about the future. It’s best to ignore ALL economic and stock market predictions.
You won't have to look hard for someone predicting doomsday for the equity markets and economy in 2024. A quick Google search results in Harry Dent predicting 2024 will bring the biggest crash of our lifetime. If you aren't familiar with Mr. Dent's prior work, allow me to fill you in:
If you want to leave a "dent" in your portfolio balance, listen to Harry's advice.
There may not have been a recession but inflation is still wreaking havoc on many American families. The long-term disruptions from the COVID response are still working themselves out and will continue. The central financial event in response to COVID was a 40% explosion in the M2 money supply. For the first time in my life, we saw unpleasantly high inflation numbers.
Inflation has certainly fallen dramatically, but when I tell people that fact, they do not believe me. “Prices have not come down, Mark” is the normal response. I am not suggesting they are. There’s a difference between inflation falling and prices falling. I know prices things are still expensive. Have you guys seen the price of diapers???
The inflation rate falling from 9% to 3% does not mean prices are going down. It means they are increasing at a slower rate. The 3% increase would still be stacked on top of the prior 9% increase. This is referred to as disinflation, which is different than deflation. Don’t you love economics?
If you want prices to drop you would hope for deflation, and policy makers believe deflation is a bad thing for us so if it's on the brink then easy money policies are adapted to fight it off.
According to the inflation calculator at www.smartasset.com, we have seen the cost of living increase 22.70% from 2019 – 2023.
The bad news is that those cost-of-living increases have been outpacing wage growth. The good news is that the tide seems be turning on that front. This chart below from www.statista.com shows wage growth more recently outpacing inflation:
OpenAI rolled out ChatGPT right before my 2022 year in review and I included some video snippets of its capabilities in that post. Since then, new AI tools seem to be coming out every single day. ChatGPT is an incredible tool with great possibilities.
Recently the capability was rolled out to speak to and have a conversation with ChatGPT: ChatGPT can now see, hear, and speak (openai.com)
With the potential for new world changing technology comes the potential for a new full blown investment mania. You can see the writing on the wall that AI from an investment standpoint could result in a massive bubble.
Certainly, there will be big winners from the AI space, but there will also be big losers. There were big winners from the 90s dotcom bubble (Amazon, Microsoft, Ebay etc.), but for every Amazon there were 10 like pets.com (which filed bankruptcy just 9 months after going public). If you're trying to pick the needles out of the haystack it is unlikely you will succeed.
Out of nowhere, I started seeing a lot of people drinking out of huge 40-ounce tumblers with the name "Stanley" on the front. My first thought was "when did everyone get so thirsty?". Next, I wondered "who is Stanley?".
Stanley is a company that had been in business for nearly 110 years. But from 2019 - 2023 their annual revenues grew from $73 million to a projected $750 million! It's an incredible story, covered more in this CNBC article.
Another Presidential election is around the corner. Let me get out ahead of the people that are certainly going to ask and answer this "no you shouldn't change your investment allocation because an election is coming up or because of who wins".
Now if you are one of the people who ends up asking this, you're admitting to not reading my blog and my ego will be damaged.
It looks likely that this will be Trump vs. Biden round II. We have some data at this point to verify you shouldn't sell your stocks if either of these two wins, since they have now both served as President.
Trump won in 2016. The stock market did not crash. From November of 2016 - October of 2020, global equities (measured by the ETF, VT, again) earned 9.76% annualized (7.74% after inflation).
Biden won in 2020. The stock market did not crash. From November of 2020 - December of 2023 (term not over yet of course), global equities earned 11.09% annualized (5.49% after inflation).
Whoever wins is going to have to address the sunset provision that was in the 2017 Tax Cuts and Jobs Act (TCJA), which is set to go into effect 01/01/2026. If it does indeed expire, there will be fairly significant tax increases for many Americans. I'd suspect that no matter who wins, at a minimum we will see certain elements of the TCJA extended.
I leave you with 3 key points I included last year's annual update, which are core beliefs of the investment approach here, and I think will lead to better investor outcomes over time:
Enjoy your 2024 and stay the course.
Disclosures: This article is for informational purposes only and should not be considered a recommendation. Information contained in this article is obtained from third party resources that Meredith Wealth Planning deems to be reliable. Consult with a financial advisor before implementing any strategies. Past performance does not equal future results. Meredith Wealth Planning does not guarantee any minimum level of investment performance or the success of any index portfolio, index, mutual fund or investment strategy. You cannot invest directly into an index, and index returns do not account for real life fees and transaction costs.
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