The Investment Committee was hard at work in December, navigating year-end capital gains distributions and readying client portfolios for 2024. We reviewed our Alternative (“Tranche 2”) investments this month, which included exhaustive searches for possible new investment opportunities, as well as conversations with our existing portfolio management teams. Additionally, the investment team conducted deep dives on heldaway client investments, including Private Equity and Real Estate investments.

Mega-Tech Growth Led a Narrow Rally in 2023

The S&P 500 Index finished 2023 up 24%. However, the top 10 stocks within the Index returned 62%, while the remaining 490 stocks posted a mere 8% return.

CAISSA View: After rapidly rising interest rates led to large losses for many of the large-cap technology stocks in 2022, lofty valuations lowered to much more appropriate levels. Expectations of future Fed rate cuts in 2024, along with the rise in optimism surrounding Artificial Intelligence led to a dramatic recovery in 2023. Those dramatic returns were limited to a handful of stocks, and we believe there is still plenty of room for the rest of the market to catch up in 2024.

Mortgage Rates Decline

After peaking near 8% in October, the average rate for a 30-year fixed mortgage in the United States declined to 6.6% to start 2024.

CAISSA View:  We believe mortgage rates will continue to gradually decline through 2024. The decline in mortgage rates should help improve housing affordability and alleviate some pressure on the consumer. Refinance activity, which has been quite sluggish, could pick up for those who borrowed at higher rates and are excited to lower their payment.

Bitcoin Pops

Optimism surrounding a spot Bitcoin ETF approval helps Bitcoin surge past $45,000 for the first time since April 2022.

CAISSA View: Bitcoin was the best-performing asset class in 2023, and anticipation that the SEC will approve applications for spot Bitcoin ETFs in January has led to further optimism for cryptocurrencies in 2024. SEC approval of an ETF would allow investors to easily access Bitcoin and dramatically reduce transaction costs for investors. A lot of hopefulness is currently priced in, and complete SEC rejection would likely lead to a selloff in Bitcoin.

Social Security Inflation Posted

Recipients of Social Security and Supplemental Security Income will get a 3.2% increase in benefits for 2024.

CAISSA View: The 3.2% COLA (Cost of Living Adjustment) is closer to the average annual adjustment for Social Security and SSI benefits. This follows a very high increase in 2023 of 8.7% for recipients. We believe the COLA will taper a bit further for 2025 and return to a more normalized rate thereafter.