Thinking of 2022 and 2023 as a single event
2023 was a great year for stock investors and an even better one for Dock Street clients. As Warren Buffett once said, “Any fool could make money this year, and so we did.”
But the great results for 2023 only make sense when we look back at 2022. For that entire year, the stock market was wracked by one worrisome event after another:
- The war in Ukraine
- Rapidly rising inflation
- Supply chain disruptions in several industries
- Rising interest rates engineered by the Federal Reserve to fight inflation
For most investors, all this made a recession in 2023 a virtual certainty.
But the most well-advertised recession in history failed to show up, inflation moderated, and the market realized in October of 2023 that interest rates had peaked.
Of course, the stock market didn’t wait until October 2023 to start rising. The S&P 500 was up 13% in the first half of 2023, in spite of two major bank failures. As often happens, the market anticipated the peak in both interest rates and inflation, as well as continued growth in the US economy.
The result in 2023 – the best year for Dock Street stock portfolios since 2009. (By the way, 2009 was another year that came after a bear market.)
The wild card in 2023 was Artificial Intelligence. ChatGPT, and its competitors, have radically changed investors’ views of technology companies and future productivity. While there’s a certain amount of hype connected with this new technology, we believe the long-term potential of these new tools has yet to be fully appreciated. A new technology bull market appears likely.
And AI promises to advance the idea that all businesses are technology companies now. We remain optimistic about the prospects for our portfolios and the US economy.
Best regards,
Daniel A. Ogden
Dock Street Asset Management, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. You should not assume that any discussion or information contained in this letter serves as the receipt of, or as a substitute for, personalized investment advice from Dock Street Asset Management, Inc.
It is published solely for informational purposes and is not to be construed as a solicitation nor does it constitute advice, investment or otherwise.
To the extent that a reader has questions regarding the applicability of any specific issue discussed above to their individual situation, they are encouraged to consult with the professional advisor of their choosing.
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Our comments are an expression of opinion. While we believe our statements to be true, they always depend on the reliability of our own credible sources. Past performance is no guarantee of future returns.
