Allan Roth: 2023 Review–The Final Numbers

U.S. stocks hit all-time highs, and other surprises.

Reviewed by: Staff
Edited by: Ron Day

2023 lands in the records book with the U.S. stock market hitting an all-time high, merely two trading days before the end of the year. The total return (including dividends reinvested) of the Vanguard Total Stock Market ETF (VTI) clocked in a 26.05% return for the year. In perspective, that was: 

  • 0.43% below the high two days earlier on December 27, 2023. 
  • 0.80% above the pre-correction high set on January 3, 2022. 
  • 1.44% above the previous year-end high set on December 31, 2021. 

While the market was only briefly in negative territory, there were two pullbacks during the year giving back most of the YTD return. As recently as Oct. 27, stocks were up a mere 7.5% as wars in the Middle-East and a stalemate with Russia in Ukraine weighed on markets. As is often the case, bad news is correlated with good stock returns. 

The S&P 500 as measured by the total return of the Vanguard 500 Index Fund (VOO) returned 26.32% and bested the previous record set on January 3, 2022 by 2.73%. Media reports claiming “the S&P 500 finished 0.6% below its record close of 4,796.56 on Jan. 3, 2022” fail to take into account the total return which is the only thing that matters to investors. 

Magnificent 7 Pushed Markets Higher

U. S. stock returns were anything but uniform, however, as the magnificent seven tech stocks drove the vast majority of the U.S. stock market return. Morningstar shows large-cap growth turning in a 56% return for the year while value badly lagged as can be seen from its chart below. 

Curiously, Morningstar also shows the total U.S. stock market edging closer to the large-cap growth style box. Will it begin benchmarking cap weighted total stock index funds against large-cap growth rather than large-cap blend? In my mind, the market is always a combination of value, core, and growth with the entire market being a blend. 

International stocks again lagged U.S. stocks, gaining 15.88% as measured by the Vanguard Total International Stock ETF (VXUS). The underperformance relative to the U.S. was mainly due to poor emerging market performance. International has far less tech and growth and none of the magnificent seven were international. 

Bonds had a good 2023 as well. Stocks and bonds have close to a zero correlation so it’s no surprise that both of the past two years have seen those two main asset classes moving in the same direction. A zero correlation would mean there is roughly a 50% probability they will move up or down together. The Federal Reserve raised the Fed Funds rate a total of four times and one percentage point in 2023. The market reacted with a yawn as the 10-Year Treasury bond started and ended the year at 3.88%. Though volatile during the year, there was no change over the year. 

The Vanguard Total Bond Index ETF (BND), which lost a record 12.99% in 2022 with surging rates, gained back 5.66% in 2023. As recently as October 19, BND’s total return was -3.10% so that 8.76 percentage point surge was due to declining interest rates during the last six weeks of the year. 

Below is a summary of the major asset classes as represented by ETFs.

Bitcoin was up 155.28% for the year as of December 30, 2023, which would dwarf the returns in the chart above.

Give up the human addiction to prediction 

As I was listening to financial news after the year-end market close, a commentator noted that the market surprised the experts in 2023. That was the single least surprising financial news I’ve heard all year.

It’s only human to want to feel like we have some control. I’d sure like to know the following for 2024: 

  • How markets will perform. 
  • What will be the hot sectors or styles. 
  • If there will be a new magnificent seven or perhaps a sweet sixteen. 
  • What the 10-year Treasury rate will be at the end of the year. 

If I knew the answers to these questions, I’d be richer than Elon Musk; so would the financial media experts. I’d even settle for a cloudy crystal ball that gave me a little direction. But the truth is that while many market experts explain their forecasts with compelling logic, making financial moves based on these predictions is hazardous to your wealth in the same way smoking a couple of packs of cigarettes a day is hazardous to your health.

I’m a whole lot better at predicting the past than the future. Knowing we don’t know what will happen in 2024 and beyond is one of the keys to investing. The one thing I do know is that there will be many surprises.

Allan Roth is founder of Wealth Logic, an hourly based financial planning and investment advisory firm. He also benchmarks portfolio performance for foundations and other business concerns. Roth's website is You can reach him at [email protected] or follow him on Twitter at Allan Roth (@Dull_Investing) · Twitter