Year in review – 2023 market triumphs, trials, and trends

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This content is strictly for educational and entertainment purposes only and should not be interpreted as a recommendation or investment guidance. Keep in mind that this information is not personalized and should not be the sole basis for your investment decisions, as there may be additional factors to consider. Indexes are unmanaged and cannot be directly invested into. Past performance is no indication of future results.

Investing involves risk and the potential to lose principal. Any securities mentioned are illustrative purposes only and is not a recommendation. Hi and welcome to Mobile Money by Moomoo. I'm your host, Justin Zacks, Vice President of Strategy of Moomoo Technologies. I've spent my whole career in and around financial markets. From working at a bulge bracket investment bank to a leading global financial news organization, something I've a real passion for.

This show helps investors gain a better understanding of markets and their money. As the end of the year approaches, I wanted to review what's happened so far this year in markets, in the economy, since the year's not quite over. All the results are going to be through the end of November. So let's take a look first at how the market's done overall on the index level, if we look at some of the major indexes.

Firstly, let's think about the S&P 500 in 2022, down 19% approximately and it is up 19% over the past 11 months and again through the end of November. What has happened this year that's a little bit different that has some people worried is a lot of the performance in the S&P 500 has been driven by just a few stocks.

So if you took the actual performance of 19%, you may expect maybe 250 of those stocks would have performance over that level and 250 under. And that's not the case at all. So what we've seen is only 137 stocks, that's about 27% have seen performance this year above that average level. And for the entire year, I mean, again, we're up 19% on the S&P 500.

Only about 55% of the S&P 500 stocks are even positive. So this goes to show you, yeah, if you're in the index, you've done well. But if you're not in the right stocks, you may not have done well. I mean, there's 45% of of the stocks in the S&P 500 are down on the year. So it's something to think about.

Like, you know, only a few winners have really driven this and this is really this magnificent seven. And let's talk a little bit about the Magnificent Seven. The Magnificent Seven is comprised of the seven largest shocks in the market. Most of them are tech or tech adjacent. And so the Magnificent Seven is up 99% this year. And what I will tell you is it's down 45% the previous year.

So if you really took from the beginning of 2022 until now, it's really only up about 9%. So do take that into account. And let me let me just read you some of these numbers. They're really staggering for this year. Apple up 46%, Alphabet up 50%, Microsoft up 58%, Amazon up 74%. Tesla 95%. Meta platforms 172%. Nvidia the biggest gainer in the S&P 500 up 220%, shows you how much the AI boom has driven a lot of what is going on and combined these companies combined market cap is approximately $10 trillion.

And to give you an idea, if you took any of the stock markets in the entire world, there's only two stock markets that have a combined market cap over $10 trillion, and that's the Nasdaq and the NYSE. Every other country stock market does not even approach anywhere near $10 trillion. And here we are, seven stocks worth $10 trillion.

So as a reference to how narrow the stock market gains are and how few stocks are participating, I'll give you a few more statistics. Over the past decade, 52% of S&P 500 stocks on average have outperformed the index performance, again, 27% this year in 70% of stocks on average, registered gains in any average year, again, 55% this year.

Even given the fact we're up 19%, the equal weighted S&P 500 is only up 4.6%. It's really a tale of two markets. And we're seeing this among our users as well. In the third every quarter, we survey our users on different topics and and we surveyed our users in the third quarter about how they feel about their finances and their financial situation and about 38% of users saw investing returns as the top reason that their financial situation might improve into the next year.

And so that shows you that they are, you know, are bullish on stocks and investing. But at the same time, the top two reasons of financial stress and anxiety among our users are the economy and inflation. And this is even as we've had a quite a strong economy, stronger than a lot of economists expected it to be. So far this year.

And we've had disinflation, you know, inflation has come down. But obviously this is not being felt by a lot of our users. And you do have this bifurcation and you're seeing it in some of these companies as well. Some of them have done extremely well, but it's really only a handful. So there's kind of this conventional wisdom that when you do have, you know, a very narrow market, that there's, you know, that it's not going to hold up, that the future performance may not be as well.

And I think there's a lot of differing views around this. I want to read you a quote from Riverfront Investment Group that I saw that. And they kind of take you know, they did some studies and they kind of take the alternate view and they say in studying thousands of historical outcomes, going back to 1927, using a broad all cap U.S. stock index, our opinion is that neither the probability nor the magnitude of a positive three month forward stock return were significantly impaired during periods when the number of stocks declining outpaced those advancing.

So this is a measure of breadth. And so what they're telling you there is, you know, that's not necessarily the case. So just because we've had this, you know, outperformance of several stocks doesn't mean that the market is more or less likely to go up or down in the next three months. It's just something to think about when you're here.

You're going to hear this in the news all the time. And again, people will have a lot of different viewpoints as to what's really driven a lot of the outperformance among these stocks. It's really been, you know, AI and in the talk about chat-gpt in the transformation and again, I think you have a lot of differing viewpoints on this.

A lot of people are have been very skeptical about it. But obviously a lot of people are voting with their money and investors. And again, I'd like to read you a couple quotes from, you know, a Internet analyst named Dan Ives at Wedbush that he recently made about A.I.. He says We view AI as the most transformative technology trend since the start of the Internet in 1995, and believe many on the street are still underestimating the 1 trillion of AI spend set to happen over the next decade in a bonanza for the chip and software sectors.

Looking forward with NVIDIA and Redmond leading the way. So this is what he wrote in a note just a week or two ago. He says the tech sector is set for an acceleration of spending around cloud and AI spending that we believe is still being significantly underestimated by the street. So there are people that do think that we're just in an early days while, you know, a lot of other people are looking at some of the multiples, they're looking at some of the valuations and saying, well, maybe this is a stretch.

So it will be very interesting looking forward to 20, 24 to see if the AI continues to help, you know, raise margins among these companies as well as some of the other companies going to have a big effect on some of these industrial companies, for instance, or is this going to be implemented quickly? Is it going to help some of the profits of these companies?

And we'll we will find out next year. On the other side, there's been a lot of people looking to see this shift from growth to value. We saw a little bit that in 2022, but it has flipped the other way. Growth has outperformed. To give you a few more data points, the Nasdaq 100 index, which is mostly large cap and very tech heavy, is up 46% year to date.

The Russell 2000. A lot of the smaller stocks up 2.7%. So if you look at the best performing sectors, a lot of the best performing stocks within those sectors, these S&P 500 companies were in those sectors. So top performing stock of the year, NVIDIA up 220%, Meta platforms is next 172%. And the third one is very interesting. A lot of people not tech related.

So surprisingly, we do have one. It's our Royal Caribbean Cruises up 117.4% year to date. At number nine, we see Carnival Corporation again, another cruise line up almost 87%. And a lot of this has to do with an adjustment from the pandemic. Both these companies were left for dead during the pandemic. People thought they would never cruise again.

But with the idea of revenge travel came back. But these companies had tends tended to outperform some of the other travel companies. And probably two reasons around that. One is there's really been this reflation of the international traveler coming on board. And certainly, you know, something like the ski resorts in the US don't necessarily get a lot of international travelers, but the cruises do.

The other big thing with the cruises is the cost. Before the pandemic, cruises were about 20% less expensive than a land based vacation like, you know, going to a hotel near a beach or something like that. Now they're 40% cheaper. So the that that cost differential is a big deal, particularly given the amount of inflation we've had. So there are some a lot of people do want a vacation.

They want to get out there, they are employed, they have some extra money, but they still want to be careful with it and make it make those dollars go as far as they can. And cruising seems to be one of those things that is is lets them do that. And we saw Carnival come out very recently over Black Friday just after Thanksgiving, talking about, you know, record bookings for a lot of its brands, not only just in 2024, but, you know, people are already planning for 2025, even though it's still not even 2023 is not even over yet.

The fifth best performing stock in the S&P 500 year to date is is EV manufacturer Tesla up almost 95%. And we took a look at the stocks that are the most widely held by users here at Moomoo and Tesla is number one. Not surprisingly, it's grabbed the hearts and imaginations of lots of traders and it has been a well performing stock over the last number of years.

But it's not just Tesla that is among some of the most widely held stocks. Surprisingly, it's some of these other smaller EV manufacturer automotive manufacturers, such as Mullin Automotive and NIO. Those are also among the top ten most widely held here at Moomoo. In addition, Apple and Amazon are also very widely held in stocks that did again, we talked about that a little bit earlier in the podcast.

How well are both of those companies did on the back of tech resurgence and on the back of being either directly involved in AI or air just adjacent AMC Networks is one of those stocks that I think got a lot of attention through Reddit, and it has remained a stock that retail traders are very interested in despite very poor performance.

This year, it's down 84% approximately. But that does not stop a lot of users at Moomoo from still holding it. On the flip side, we saw another tech stock that had been really beaten up plantier come back in 2023 over 200%. And again, it is also one of the most top ten, most widely held stocks at Moomoo. It saw its first profitable quarter earlier this year at number six on the best performing list of 2023 for the S&P 500.

Is PulteGroup quite a surprise, A homebuilder, right? So you would expect with the Fed raising rates and mortgages going from 3% to almost 8% a couple of months ago over the span of less than two years, that people would not be buying as many homes or that home prices would go down. And it's a very interesting one I have.

Hopefully you'll be able to listen to my other podcast about why housing prices haven't fallen in. Certainly a lot of people got in front of this trade in 2022 and they were shorting these homebuilders. They just thought they would never be profitable again. And it's not the same situation as it was during the great financial crisis. There is still some incremental demand at extremely high prices for a lot of what these builders are doing.

And so they're able to adapt, they're able to offer incentives and they're able to basically market their product a lot better than existing homeowners who are kind of gotten out of the market. And so maybe not as many homes or new homes are selling, but the ones that are selling are selling at pretty fat margins. And so these companies have done pretty well.

All the homebuilders are up significantly in 2023. On the opposite end of the spectrum, let's look at some of the stocks that haven't done as well. And if we look at some of the top ten worst performing stocks, a lot of them are these stocks that maybe were run up a little bit too much during the pandemic or that were pandemic plays or recession plays in 2022 have not done well in 2023.

For instance, we have, you know, Walgreens Boots Alliance down over 46%. We have Dollar General, which is known to do well during recessionary times. We never saw the recession materialize. It's down almost 47%. Estee Lauder, the cosmetics company, did very well during the pandemic when a lot of people were ordering and using cosmetics for their Zoom calls. It's down over 48%, Moderna down 56.7%.

It obviously manufacturers one of the COVID vaccines that just haven't seen the demand people thought they would year in and year out since since the 2019 COVID pandemic and the two worst performing stocks and phase energy down 62% and SOLAREDGE Technologies down 72% year to date. Both of these companies are solar companies. Both of them are highly levered to the bond market.

So when we saw these rates go up, a lot of these are financed and has definitely hurt both of these solar companies. So what is it really been driving the markets this year? Let's get in and talk a little bit about some of the events. You know, overall, we've been up, but there were some bumps along the way, some ups and downs in.

First, those came in March when we had the banking crisis, a regional banking crisis where we saw a failure of Silicon Valley Bank after a bank run. And then we also saw Silvergate and Signature bank have problems. And so if you look at the stock market performance during that time of the week, really only a lot. The actual effect on the market really only lasted about a week from March 6th to the 10th, the market fell, the S&P 500 fell 4.6%.

And obviously the regional banks and the financial sectors stocks were much more affected over a longer period. The regional banks are still even given their comeback, are still one of the worst performing sectors this year. But the overall market was able to recover pretty quickly and that came very much after the Federal Reserve created the bank term funding program to help some of these banks.

It was March 12th, and after that it seemed like everything seemed like back on the upslope. And then just a few months later, we had Fitch and on May 23rd put the credit rating of the US debt on negative watch. And so that caused the overall market to fall about 1.9% over two days. And again, just a small blip on some of these radars.

So of something sometimes people would make a much bigger deal of these type of things, but they didn't last too long in the market continued to rally, particularly in the first half of the year that Fitch downgrade in large part was based upon government issues, particularly with the debt ceiling. And then so that ended the debt ceiling ended up getting resolved on May 29th.

And you really saw a melt up into June where we had a really great June before the markets leveled off. They're the only real downdraft we've had all year came during September and October. The S&P 500 was down 4.9% in September. And if you took September and October combined, the S&P 500 was down 7% on multitude of reasons for this, there were fears over a government shutdown.

There was the Israel Gaza conflict that started on October 7th and is still ongoing. That led to some fear in the market. But probably the biggest issue that everyone's been following and that ultimately has influenced the market the entire year was long term interest rates. So we saw long term interest rate yields really spike up during September and October, basically over fears that no one wanted to buy this debt and that the treasuries interest costs would continue to increase.

And so that was something that really caused the markets to sell off. And when you see the US government have these ongoing fiscal budget deficits and there's fewer and fewer willing buyers of that debt. And so really nothing changed until November 1st when they had the refunding announcement and that this was basically every quarter the Treasury comes out and says this is how much paper they want to issue, how much debt they want an issue in the timeframe around that.

And so what happened was the Treasury decided they still have to issue a lot of debt, but they're issuing a lot more short term debt in the fourth quarter than they were doing a longer term debt. And that's made a big difference in solidifying some of those bids for longer term bonds when people know there's not going to be a huge supply.

I mean, that could change next year. But right now, that's what led to a significant rally in bonds and which led to a significant rally in stocks in November, one of the better Novembers we've seen in quite a long time. But if you really had to sum up the reason, the one main reason the market has moved up so much in 2023, all you have to do is kind of take a look at the mirror image of the reasoning behind the decline in 2022.

And it was 2022. There was a real fear that the US economy would fall into recession following all these interest rate hikes and that inflation would get out of control in 2023. You saw a lot of these things reverse. So basically the economy did not slip into recession, at least not yet in in 2023. And it did better than economists expected.

And that helped keep a lot of corporate profits up and and kept investors, you know, interested in investing in the market. And the other part was, you know, inflation hasn't come back down totally, but it has come down a lot more than a lot of people had expected it to. If you look at the CPI measure that comes out monthly at the beginning of 2023, it was 6.4%, which is very elevated.

But by June, we saw 3.0%, in October, 3.2%. So it's it's come off significantly. It's still not at the 2% level that the Fed would like to see it at. The other thing you really need to be aware of with CPI is, you know, it's very much influenced by food and energy. And those those two items can be super volatile.

So a lot of times people like to look at the core measure and the core measure started the year at 5.6% and has dropped most recently to 4.0%. And do note that 4.8% is still quite high. And so as much as inflation's come down, depending what measure, looking at it, particularly core CPI, it's not down that much. In fact, prior to this bout of inflation, we hadn't seen 4.0% or higher on core CPI since 1991.

So in 2023 we've really seen a risk on type mentality and that showed up as well in sector performance. If you want to look at the sectors that have done the best, S&P 500 sectors, tech up up over 50%, communications services up 47%, consumer discretionary up 33%. You know, these are the top ones. And usually there's a very growth and the sectors that do well in a bull market are in an environment where people are very sure of their investing and not particularly afraid or defensive.

On the flip side, the defensive sectors, all of the traditional defensive sectors are down on the year. Health care down 3.7%. Consumer staples that's here, you know, everyday needs like your batteries and your diapers are down 4.5%. The energy index down 4.6. And the utilities have really gotten smashed this year, down 11.7%. Again, this is just a real mirror image sector wise, just as we saw a mirror image of the overall index of mirror image sector wise in 22 and 22, we saw energy, utilities, consumer staples and health care as the top four sectors and tech, consumer discretionary and communication services as the bottom three sectors.

So we're just seeing some of these gains from certain sectors flow into other sectors and vice versa. So we think we've seen an evening out there. So that's why it'll be very interesting to see what happens next in in as much as long rates and inflation and the outlook in inflation and the outlook in the economy and the economy itself influenced 2022 and 2023, it's very likely that it will influence 2024.

Everyone is now looking for the Fed to cut rates in 2024 at some point, but there's a lot of discrepancies among market participants as to when that will be, how deep that will be and where they ultimately will wind up. You know, where will that rate be when they say we're going to stop? Likewise, a lot of people feel unemployment is now on the rise in the economy may be slipping into recession, but we're not sure for quite there yet or if we're going to continue to chug along towards a soft landing.

So 2023 has been a good year for some investors and hopefully it has been for you as well. I just wanted to review a little bit of the features. A lot of the users on Mahmood's platform have been using during the year to help them level up their trading. The earnings of feature is relatively new to the Moomoo platform and it's one of my favorites, so it's a great one.

Stop shop for everything earnings. And if you think about earnings, you know you have them four times a year and they last about five weeks each and they're some of the better opportunities for traders to find great trades. But you really have to do your research and it's using that earnings calendar to figure out when your companies are going to report.

And then getting in there, seeing what the metrics are going to be, what the estimates are, and then post earnings, evaluating the actual earnings in the metrics and figuring out what the executives said on the conference call, either listening to it or via a transcript and then planning your trading all around that. Those one of the great things in recent additions to the platform and along the lines of earnings, you know, you really have to think both about fundamental and technical analysis.

And you know, both of those are really vital, whether it's earnings season or not. And so, you know, Google has these great charting tools with over 100 insightful indicators, and over 37 drawing tools are enhanced by a new patented method. The powerful combination offers a deep and more precise analysis of market movements. And then on the financial side, we now have a more visualize financials that really can show you.

Instead of just reading the metrics, you can really visualize it with with charts and bar graphs and gives you access to financial estimates, business data, analyst ratings and all. This is all for free. Speaking of free clients with a funded account can get access to real time level two quotes. That's up to 60 levels of market depth that refresh every point 3 seconds for trading insights and decision making.

One of the other features I really love about the Moomoo app is its institutional tracking, so I always want to know what this big funds are doing, what this professional investors are doing. So, you know, every every quarter they file what's called a 13 F filing and it goes in the SCC and they're notoriously difficult to read. But basically Moomoo has taken all of this data and put it into a really great visual format, easy to read, and you can really understand what these well known funds like Berkshire Hathaway or Ark are doing.

You know what they're buying, what they're selling. It doesn't mean you have to trade that way, but it does inform your trading, figure out what they're doing, figure out why they're doing it. Maybe you agree, maybe you don't. But you want to have that information of what the big players are doing in the market. One of the other things that really informs my trading is news.

I also have a news background, financial news, and have worked for several of the large news organizations and we have a lot of them right here on the Moomoo app. Bloomberg, CNBC, Dow Jones Benzinga Investors Place. It's ensures you're always informed with credible and timely information and keeping you ahead of the market. Once you're done with the news, then you can get into short sale analysis a little bit more complex.

But if you are interested in shorting or knowing who is shorting, Moomoo has a great short sell analysis tool. Not only does it have the bi monthly data that you'll see on a lot of platforms, including them, we also have a comprehensive daily short volume data combined from both the Nasdaq and the NYSE, a really unique feature to the Moomoo app.

After you have all this, you may be ready to get started, started trading, but maybe the first thing you might want to think about is doing a little paper trading. And we have a great paper trading tool where you can trade virtually without putting your own money to risk. And it's a really great way to learn and educate yourself about markets and trading before you go in and put put your money in there.

Hopefully you've already been able to test out some of these great features on the Moomoo platform. If you are a user and if you're not or if you haven't been able to yet, it 2024 is soon on the way and hopefully you'll be able to download that app, test. Some of these great features out, many of which are available for free.

You don't have to put any money in right away, so just give it a chance and see if it can inform your trading, If it can make you a better trader and give you the type of knowledge that you're going to need to carve out a path for financial freedom. Well, this is the last episode of 2023. I hope you enjoyed the yearly wrap and we'll be back in 2024 with a bunch of brand new podcast episodes about a lot of different topics.

So looking forward to talking with all of you. Thank you very much. Have a great New year. Level two data is free from the new Financial Inc accounts with a minimum 30 day average account value of $100 or more. Other conditions apply. To learn more, visit moomoo.com/us/support/topic3_435.

For any institutional tracking portfolio. The composition provided is updated on a significant delay and may be incomplete. It is not possible to replicate the timing or exact holdings of institutional portfolios. When short selling there is no limit on how high a stock price could rise, so the potential losses are unlimited. Other risks include dividend risk and margin risk.

This strategy is not appropriate for all investors. The opinions expressed are those of the host and any guest speaker and not necessarily those of Moomoo Technologies Inc or its affiliates. The podcast is provided for informational educational purposes only and is not a recommendation or endorsement of any particular investment or investment strategy that may be mentioned or covered in the podcast.

All investments involve risk and the loss of principal as possible. Past performance does not indicate or guarantee future success. Moomoo is not affiliated with any outside guests or their companies. Information provided in this podcast is general in nature and may not be appropriate for all investors. The Moomoo app is an online trading platform offered by Moomoo Technologies Inc securities, brokerage products and related services available through the Moomoo app or offered by Moomoo Financial Inc, a member FINRA SIPC.