Introduction
2023 was a thrilling year for the markets, the broader economy, and notably for FINQ. Despite the United States experiencing interest rates at their highest in over two decades, the S&P 500 still saw an impressive gain of 24.23%. Remarkably, FINQ portfolios significantly outperformed this benchmark, showcasing our ability to navigate and excel in such dynamic conditions.
This report will delve into the events that shaped the markets last year, the evolving landscape, and the stocks that made significant moves. We will explore the impact of holding onto the top-performing names and how FINQ's strategic approach has been instrumental in creating 'alpha on the market.' FINQ’s portfolios as a whole, outperformed the S&P 500 by at least 1.19X. Below we aim to demonstrate how we achieved these returns and outline how FINQ portfolios allowed us to exceed market expectations.
Changing landscape over 2023
Last year was full of global financial events that shook the market. Here are some of the most critical catalysts that drove price movements - either up or down - in the markets in 2023:
Negative market catalysts in 2023
- The U.S. government hits its $31.4 trillion debt limit: Uncertainty about the U.S. government’s ability to meet its financial obligations and growing concerns over potential economic instability.
- Silicon Valley Bank fails: The failure of a significant bank indicated underlying vulnerabilities in the financial system, leading to concerns about the health of other banks and financial institutions.
- The initiation of the Israel-Hamas conflict: Conflict in a geopolitically sensitive area often heightens market uncertainties and risks, negatively impacting investor sentiment. Furthermore, as the conflict expanded, Houthi rebels operating out of Yemen began disrupting shipping activity in the Red Sea, further spooking markets.
- Members produced a consensus agreement at COP28: This milestone was viewed by markets as a commitment to accelerate the transition away from fossil fuels. As a result, it was seen as a negative event for markets heavily invested in or reliant on fossil fuels since a faster transition could negatively impact the profitability of these sectors.
Positive market catalysts in 2023
- OpenAI launches GPT-4: This launch signaled advancements in AI technology, boosting investor confidence in the tech sector and related industries.
- UBS acquires Credit Suisse: The acquisition signaled stability in the banking sector.
- LVMH becomes the first European company to hit $500 billion market value: This milestone reflected strong market confidence in LVMH, luxury goods, and the broader European market.
- WHO ends COVID-19 global health emergency: The ending of the global health emergency signaled a return to normalcy, boosting market confidence and economic activity.
- Nvidia’s monumental earnings release triggers renewed excitement over AI: Strong earnings from a leading tech company signaled health in the sector and drove positive market sentiment, especially in the field of artificial intelligence.
- U.S. government suspends the debt ceiling: This alleviated immediate concerns about government default and economic instability, positively impacting market sentiment.
- The May CPI report in the U.S. marks the halving of inflation from pandemic highs: Decreasing inflation signaled a more stable economic environment, typically positive for markets.
- The Fed pauses rate hikes following an aggressive campaign during the preceding two years: A pause in rate hikes signaled the Fed could soon be close to cutting interest rates. Lower rates encourage businesses to borrow to fund expansion, which is typically bullish for the markets.