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Political polarization, bank failures, recession concerns, terrorist activity and global military conflicts were all troubling issues that weighed on the minds of investors last year. However, financial markets showed resilience, stock markets climbed, and for many investors, portfolio returns turned out to be satisfactory in 2023.

A group of technology-focused companies, commonly referred to as the Magnificent Seven – Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla – had an extraordinary year, with each stock returning 49% or more. “Mag 7” returns comprised the bulk of the S&P 500 Index’s full year gain of 26%.

To put some perspective around the scale of these companies, the combined market value of the Mag 7 at the end of 2023 was greater than any other single country’s stock market.

Bond returns were less ebullient, but still positive – breaking the trend of two consecutive years of negative returns in 2021 and 2022. The Bloomberg Aggregate Bond Index, a benchmark for bond performance, returned 5.7% in 2023.

Behind the positive bond performance at year-end, there were wild swings in prices and yields throughout the year.

Market participants’ opinions on the likely path of inflation and concerns about how the Federal Reserve might respond with adjustments in short-term interest rate policy were factors behind the bond price swings.

Despite the intra-year volatility, the yield on the 10-Year Treasury note finished 2023 exactly where it started, at 3.88%. Short-term Treasury yields closed the year much higher, though, reflecting the inflation-fighting activity from the Federal Reserve, which included multiple increases in short-term interest rates.

Below is a snapshot of stock and bond returns by quarter for 2023.