The Wednesday Letter #201 - 1/3/2024

THIS WEEK: S&P Sectors Review and Outlook; 2023 European Stock Winners; Hot and Cold Wars; New Year Resolutions.

S&P SECTORS REVIEW AND OUTLOOK

2023 was a banner year for the US stock market, confounding many strategists who had expected continued losses after 2022 or only a modest recovery. Although the rally was dominated all year by the Magnificent Seven and by the tech-heavy sectors (see bottom part of the table), breadth improved in the last two months of the year. In December alone, the small-cap Russell 2000 index rose 12.1%, an advance that accounted for the bulk of its 15.1% gain for the year.

Also in December, the Real Estate XLRE, Industrials XLI, Financials XLF, Materials XLB and Health Care XLV sectors all had strong moves. That allowed the first four to have respectable returns for the full year, and the fifth to record a small gain. Defensive and contra sectors Utilities XLU, Consumer Staples XLP and Energy XLE were down for the year. Energy lost 4.1% on the back of an 11% decline in the price of oil. However it remains by far the best performing sector over the two years 2022-23 (s…