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During the fourth quarter of 2023, the LOM Equity Growth Fund rose 11.73% as markets rallied on optimism about an economic soft landing and the potential for more accommodative monetary policies from the world’s central banks.
Coming into 2023 consensus projections saw a year of exceedingly weak growth amid tangible risks of a downturn. Federal Reserve members projected a recessionary increase in the unemployment rate and extremely low growth for 2023. Professional forecasters were not much more optimistic as they placed the chances of economic decline at some of the highest levels in years with 85% of economists forecasting a recession.
However, by the end of 2023 growth had instead meaningfully exceeded expectations, with GDP rising 2.3% through Q3 as the US added approximately 2.8 million jobs. Meanwhile, inflation has cooled to some of the lowest levels since the initial price surges of 2021, with core PCE inflation already coming in below the Fed’s late-2022 projections. In short, 2023 turned what was once a bleak outlook into a story of remarkable recovery. Those trends continued into Q4, finally boosting equity markets following a relatively lackluster preceding nine months for the average stock.
Over the course of 2023, global equity markets rallied close to historical highs. The MSCI World Stock index ended the year up 21.77%, with gains largely on the back of the seven stocks pushing US markets meaningfully higher. Europe and Japan also saw respectable gains, with China’s Hang Seng (-13.8%) being a notable laggard as interest from international investors has dried up and the country’s real estate meltdown escalated.
On a sector basis, stocks participated more broadly than the prior nine months when just a handful of mega-cap stocks drove index performance. In Q4, the best sectors were Information Technology (+17.58%), Real Estate (+17.53%) and Industrials (+13.93%). Lagging sectors were Consumer Staples (+5.49%) and Healthcare (+5.95%).
The LOM Equity Growth Fund benefitted on a relative basis in Q4 from good stock selection in the Technology, Industrial and Financial sectors. Looking ahead, we will continue to focus on high-quality, wide moat issues in our security selection process.
The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.
