2023 Bright Spots for Investors Despite Volatile Markets

🌟 The S&P 500 is up 13.5% this year through November 3, which is almost twice the index’s long-term average. Surprised? 🤯

💡Michael Baum, CFP®, RICP®  explains how the market's resilience offers reasons to be grateful this holiday season.

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Transcript

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Welcome to You and Your Money. Empowering you to reach your goals with tips to help you Plan Well, Invest Well and Live Well. Today's episode features Michael Baum, vice president and associate financial advisor at Weiss, Hale and Zahansky Strategic Wealth Advisors. Let's dig in to today's topic. Welcome back to You and Your Money on the air and sponsored by Weiss, Hale and Zahansky Strategic Wealth Advisors. Joining us today is Michael Baum, vice president and associate financial advisor at Weiss, Hale and Zahansky Strategic Wealth Advisors. Great to have you back, Mike. Good morning to you. Good morning, Gary. It's great to be back. So today's topic 2023, end of the year, we're looking back bright spots for investors despite the volatile markets and we heard all about it all year 2023. It was quite a roller coaster for investors, ups, downs and everything in between. What's your take on this year, Mike? Well, Gary, you said it's been a volatile year. There's been some market turbulence, no doubt about that. And I think if you ask ten people on the street, you know how the markets have been this year, more than half might tell you it's it's been negative. And that's just, I think, human nature. You know, we feel the negative more than we then we appreciate the positive sometimes. So, yes, there's been some volatility. But you just heard the numbers on some of the major indexes and where they stand here today. And I'm going to give you a bunch more data and bunch more numbers today. But suffice it to say, there have been some remarkable bright spots for investors that seem to be getting overshadowed. Take the S&P 500 index, for instance. Yes, it experienced a 10.3% dip from the end of July to October 27th, and that sparked some serious concern for investors. But if we take a look at the broader picture, the index is actually up by more than 18% this year. That's about double its long term average. So that offers a silver lining amid the challenges that we've faced. Yeah. So, you know, there's some encouragement there for investors. Were there any particular sectors that stood out among the fluctuation here? Absolutely. So despite the market's ups and downs, certain sectors showed remarkable resilience and growth throughout the year. The S&P 500 communications sector, for instance, witnessed a substantial rise of more than 45%. And that's led by companies that we all know, like Metta or formerly Facebook and Alphabet or Google. The S&P 500 information technology sector houses companies like Microsoft and Adobe, and it soared by over 48% this year. Even the consumer discretionary sector, which is fueled by Amazon, Tesla and homebuilders, has jumped almost 34%. Again, some pretty impressive numbers and some pretty impressive standouts in different sectors. How about how about how have individual stocks performed in 2023? Well, I just you know, we name some of the stocks that are leading those sectors, but I'm glad you asked, because that is, you know, an interesting dichotomy. And it's important to look at individual stocks versus overall indexes. Naming some real standouts on the individual companies list would be in video meta platforms, Palo Alto Networks, Royal Caribbean Cruises and Tesla. They've all exhibited gains ranging from 75% to over 200%. So some real tremendous standouts. But when we talk about the stock markets more broadly, we usually do it by referencing indexes which track the performance of a group of companies. For example, the S&P 500 index tracks the performance of the five largest US companies by market cap. So the index income encompasses companies across all different industries and sectors. And just because the index is up does not mean all of the sectors or individual companies are up. In fact, this year, if we took away the largest ten companies in the S&P 500 index, the remaining 490 companies in the index are pretty much flat. So this reminds us of the importance of portfolio diversification, something we always encourage our clients here to do. It's so funny, you mentioned Royal Caribbean Cruises. I go back to like during COVID, it's like the cruise industry was in Shell shambles. Yeah, those companies, it was a disaster. We weren't sure they were going to make it. Yeah. And look and now you're pointing them out as well. They did very well. They said that. And that's the market. People want to get back on those cruise ships now and they're doing really well. Yeah, that's life in the markets. Great insights on diversification, too. What about the significance of long term investing amidst the market volatility? So amidst all the market noise and social media frenzy that we see during any downturn, the long term perspective often gets overlooked. So historically, stocks have a strong upward trend in the long run. I'm going to hit with some more numbers here, if that's okay. That's okay. I think these are these tell a pretty compelling story. So during bull markets, which on average lasts a little over five and a half years, the S&P 500 gains an average of 265%, while during bear markets, which typically lasts about 12 months, we see an average decline of 33%. So if you try to avoid the bear but then end up missing out on the bull, you know, you're really going to get hurt there. So investors who stay in it through the bear markets are usually rewarded in the long run. That's a great point. I'm glad you pointed that out. So what about trying to time the market? That's what everyone wants to do. So everyone wants to do it. Sure. But timing the market is a tough, tough game, Gary. It requires predicting both the markets peak like, oh, this is the top, we got it. Now's a good time to sell. And, you know, this is this is the bottom. It's time to get back in. Those are very, very difficult things to predict. Studies have shown that missing the market's best days could significantly impact returns. And I'll give you an example. An investor who remained invested from 2013 to 2023 just stayed in it. Yep. Didn't didn't jump out or jump back in at any time. But they experienced two bear markets along the way. But they still saw their portfolio nearly triple during that that decade. Whereas if you missed the top 40 days in the market, you would have seen a substantial decline in your portfolio's value. That's a great visual to the way you point to out. Absolutely. Got to got to hang in there. These are great insights, by the way, for our listeners. Remember that consulting a financial advisor like Mike can provide personalized guidance based on your unique financial situation. And that's why we like to sit down and chat with Mike and the crew from Weiss, Hale and Zahansky. Great job today. Thanks for sharing those insights and pointing out the bright spots in the market in 2023. Good job. Thanks for having me today, Gary. It's nice to share a little positivity and optimism this time of year. Nice way to end the year too. If you'd like to start off the new Year strong or need assistance in planning your financial future, you can request a complimentary consultation on the Weiss, Hale and Zahansky website, whzwealth.com. You can call them to 860-928-2341 and be sure to listen next time for more insights on the financial markets. Until next time. Again, thank you for joining us. Good job. That's it for today. Thanks for listening to You and Your Money. Find even more episodes, videos and other resources at our website whzwealth. com. Be sure to come back next week for more tips to help you live fearlessy and pursue your financial and life goals. Until then, live well. Weiss, Hale and Zahansky Strategic Wealth Advisors offer securities and advisory services through Commonwealth Financial Network member FINRA/SIPC, a registered investment advisor. Fixed insurance products and services offered through CES Insurance Agency. They practice at 697 Pomfret Street, Pomfret Center, Connecticut, 06259 and can be reached at 860-928-2341. Weiss, Hale and Zahansky Strategic Wealth advisors do not provide legal or tax advice. The tenured financial services team strive to support clients in achieving their financial life goals. For more information regarding wealth management and customized financial planning with Weiss, Hale and Zahansky Strategic Wealth Advisors, please visit www.whzwealth.com.