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Dear Valued Clients and Friends,

If you asked Larry David, he would say it’s way too late to wish you a “Happy New Year”, but we’re going to do it anyway.  As we embrace the start of 2024, we’re presented with new opportunities and challenges in our financial landscape. Reflecting on the past year and looking ahead, I’d like to share some insights that might help shape our expectations for this new year.

Reflecting on the Final Quarter of 2023

The close of 2023 brought some notable shifts in the markets. We witnessed a significant (and much needed!) relief rally in the fourth quarter. Interest rates, which had been climbing, peaked in December following the Federal Reserve’s meeting, signaling a more accommodating stance. This pivot positively impacted bond markets, too, resulting in one of the best 2-month rallies we’ve seen in over four decades.

Interestingly, oil prices also took a dip towards the end of the year despite the geopolitical tensions rising in the Middle East.  In the equity markets, we saw a reversal from earlier trends — smaller companies and cyclicals, which had lagged, began to catch up, narrowing the performance gap.  This improvement in the “breadth” of the market rally was also much needed and a positive sign for the markets.

2024: A Year of Cautious Optimism

As we step into 2024, it’s important to approach the markets with both optimism and a healthy dose of caution. If you pay attention to the market predictions that many investment firms will issue at the beginning of the year, the term “cautiously optimistic” probably appears in most of them and this year is no different. There’s a current sentiment of confidence about a smooth economic transition (‘soft landing’), but remember, markets often express strong opinions that don’t always align with the slower pace of economic realities.  No matter the conviction level the stock market wants to have, the economy will take longer than most think to reveal its ultimate answer.

The Presidential Election Year

The 2024 presidential election campaigns will soon be dominating the headlines and news channels, and it is sure to be an interesting year, to say the least.  Since 1952, the S&P 500 has not declined in a year in which an incumbent president was running for re-election (avg. return of 10%). Stocks have declined in presidential election years, but in each of those cases, it was a year in which there was an open election with no incumbent running (1960, 2000, and 2008). This makes sense. Presidents want to be re-elected and will use whatever policy levers are needed to boost the US economy. In fact, every president who avoided a recession two years before their re-election went on to win the election. And every president who had a recession in the two years before their re-election went on to lose.

I think it is important to remember that even in years when the stock market delivers positive performance, that doesn’t necessarily mean it was an “easy” year and that is what I’m expecting to see in 2024.

If you’d like to read more from the Raymond James Investment Strategy Committee, we’d like to share the most recent edition of the Investment Strategy Quarterly. This issue provides more details and discussion on the economic and market outlooks for 2024 a well as market performance during election years.  Be sure to let us know if you have any questions or would like to discuss any of these topics further.

Introducing Greg Wilkinson

We’d also like to share some exciting news with you — we have a new addition to our team!  Please join us in welcoming Greg Wilkinson, who has recently joined our office as a new Financial Advisor in training. Prior to joining our team, Greg spent 6 years as a Manager within Deloitte Consulting’s Finance practice. Greg comes to us with a strong passion for finance and a commitment to delivering exceptional service to our clients. As he embarks on this exciting journey, we are confident that his dedication and eagerness to learn will make a positive impact on our team and, ultimately, on the quality of service we provide to you.

During this training period, Greg will be working closely with our experienced advisors to further develop his skills and gain valuable insights into the intricacies of financial planning. We believe that his fresh perspective and enthusiasm will bring a new dimension to our team, benefiting both our office and, more importantly, our valued clients.

We encourage you to extend a warm welcome to Greg as he begins this exciting chapter in his career. While he is in training, his interactions with clients will be closely supervised to ensure a seamless transition and a positive experience for everyone involved.

As we journey through 2024, let’s embrace the opportunities and challenges with a balanced perspective, informed strategy, and the confidence that comes from our shared commitment to your financial well-being.

Thank you for your continued trust and partnership. Here’s to a prosperous and fulfilling year ahead!

Warm regards,

Todd M. Wike, CFP®
Managing Partner, Potomac Financial Group

*An affiliate of Raymond James & Associates, Inc., and Raymond James Financial Services, Inc. All expressions of opinion reflect the judgment of the Investment Strategy Committee and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Investing involves risk, and you may incur a profit or loss regardless of the strategy selected, including diversification and asset allocation. Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Holding bonds to term allows redemption at par value. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. Investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors.

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