Welcome back, fellow Pleb, and happy New Year! 2023 was quite a ride, and the Plebdices performed remarkably well. We hope you’re as excited as we are for this year’s 2024 Plebdex. To simplify the reader’s selection process for the upcoming year, there will only be one Plebdex. So, let’s dive into our 2023 market recap.
2023 Market Recap
Going into 2023, we never anticipated the potential gain for so many of the market’s participants and are happy to have selected some of the finest performers.
2023’s story began with a rapid rip higher for small-caps, emerging markets, and risky assets, continuing a run-off of the October 2022 bear market lows. This rip higher would be short-lived soon and ended in February. However, with the advent of large language models (LLMs) and generative AI, the stock market began to bet the house on a “New Paradigm.”
Megacap stocks, now coined the Magnificent Seven, lifted the stock market from the February/March lows into summer highs (CNBC Magnificent 7 Index – Stock Price, Quote and News – CNBC). Nvidia alone rose 112% during this period, adding $600+ billion in market capitalization. The sizzling summer ended with a correction of 10%, ending in October.
When the hour seemed bleakest, the U.S. Federal Reserve (Fed) sent a much-needed confidence boost to markets – it was time to pivot with easing inflation. In November, Federal Reserve chair Jerome Powell hinted that the rate hike cycle started in 2021 was complete, and rate cuts were on the horizon. This Fed pivot, in market parlance, sent equities higher into the yearend close, with the S&P 500 rising a combined 14% for November and December alone for a total year’s return of 25%. Interestingly 60% of the S&P 500’s gain came from seven megacap stocks: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, meaning the rest of the S&P’s 496 companies (there are 503 companies in the S&P 500) contributed to the remaining 40% of the markets return.
The lack of breadth in the overall market is concerning, but it hints at what money moves are necessary in the new year to continue the Plebdex’s outperformance relative to the S&P 500.
2023 Benchmarks
Looking back on 2023, we are quite happy with the performance of our portfolios. The Nasdaq 100 and ARKK Innovation Fund are the only funds to beat the Outperform Plebdex. Our goal has always been to outperform the S&P 500 with this grouping.
The ARKK Innovation Fund is invested in risk-heavy assets; despite its 73% increase, it sits 65% below its all-time high and has started 2024 with a quick 10% correction. Regardless, we will take our 40% return in 2023 and look toward continued capitalization on those compounding gains.
| Holding | 2023 Year Performance |
|---|---|
| The S&P 500 (FXAIX) | 24.66% |
| The Dow Jones Industrial Average (DIA) | 13.79% |
| The Nasdaq 100 Index (QQQ) | 54.46% |
| The ARK Innovation Fund (ARKK) | 73.30% |
| Robinhood’s Recommend Portfolio Blend | 22.23% |
| Betterment’s Recommend Portfolio Blend | 18.35% |
| Fidelity’s ZERO Large Cap Index Fund (FNILX) | 26.12% |
| Vanguard’s Closed Prime Cap Admiral Fund (VPMAX) | 19.70% |
| The 60/40 Plebdex | 13.84% |
| The Value Plebdex | 14.85% |
| The Mineral Belweather Plebdex | 26.50% |
| The Outperform Plebdex | 40.31% |
The 2024 Plebdex
Now, to the exciting part of this blog post – what do the 2024 Plebdices look like? Well, there are a few changes for this upcoming year.
- The 60/40 Plebdex will retire! We will check in on it from time to time, and it is still a great selection for someone looking for that blending between stocks and bonds.
- The Value and Mineral Belweather indices will be discontinued.
- The Outform Plebdex will henceforth be known as the official Plebdex.
We will continue to evaluate the Plebdex against the original benchmarks in the post here: The Plebdex Portfolios – Investing For Plebs. So, without further delay, let’s look at what we anticipate for 2024 and remember – No Investment Advice! 🙂
The Plebdex is designed each year with the criteria below in mind:
- Invest in sectors with great trajectories.
- Invest in businesses with well-known brands, great cash flow, and outstanding leadership.
- Consider macro and micro market trends and outlooks.
- Reinvest all holdings’ dividends.
With each of these items in mind, we feel confident that we can match the performance of the S&P 500. However, unlike Icarus, we dare not fly so closely to the sun.
For 2024, we have rebalanced last year’s portfolio to address the following market themes:
- Rotation – we anticipate market participants will rotate gains from some megacap stocks into underperforming sectors and value-oriented indices. This is captured in our choice of an equal-weighted S&P 500.
- An underwhelming Fed Pivot – we anticipate the Federal Reserve will surprise the market and not cut interest rates 6-8 times as the market is currently pricing. We expect 3-4 rate cuts in 2024, around 75-100 bps.
- Geopolitical risks remain – we anticipate tensions in the Middle East will remain, keeping energy and commodity prices elevated.
- China exits recession – we anticipate that China’s sluggish economy will have a turnaround in 2024, putting pressure on inflation, keeping rates sticky, and increasing energy demand.
- Technology continues outperforming – we anticipate the hype behind LLMs, generative AI, and cybersecurity to continue into 2024. However, investors will expect corporate progress to justify steep valuations.
- Bitcoin adoption accelerates – we anticipate the adoption of cryptocurrency ETFs beginning with Bitcoin. We also expect adoption by emerging markets over developed economies.
- Healthcare and biotech outperform – we anticipate a breakout in these sectors. GLP-1 drugs, to name one positive catalyst, are just beginning to revolutionize healthcare.
| Holding’s Ticker | Weight | Fund Expense Ratio |
|---|---|---|
| S&P 500 Equal Weight (GSEW) | 15% | 0.09% |
| S&P 500 Market Weight (FXIAX) | 15% | 0.01% |
| Cybersecurity Sector (CIBR) | 10% | 0.60% |
| Energy Sector (XLE) | 10% | 0.10% |
| Healthcare Sector (XLV) | 10% | 0.10% |
| Biotech Equal Weight (XBI) | 2.5% | 0.35% |
| Biotech Market Weight (IBB) | 2.5% | 0.45% |
| Bitcoin (GBTC) | 5% | 1.5% |
| China (KWEB) | 5% | 0.69% |
| Uranium (URNM) | 5% | 0.83% |
| Clean Energy (QCLN) | 5% | 0.58% |
| Rivian Automotive (RIVN) | 5% | 0% |
| Amazon (AMZN) | 5% | 0% |
| Google (GOOGL) | 5% | 0% |
We look forward to a profitable 2024! Thank you for reading and bon chance investing! Au revoir, fellow plebs – may the odds ever be in our favor!
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