· It was a very quiet week in the financial markets as both retail and professional investors historically take the time between the two holidays to spend time with their loved ones and this year, to recuperate from a substantial level of volatility. At Fagan Associates, we were quite busy as December 31 is the firmest of calendar deadlines (except for perhaps April 15) so that we had to make certain all Required Minimum Distributions (RMDs) were completed and that we offset realized capital gains with capital losses, when appropriate in non-qualified accounts.

· Stocks notched their ninth consecutive week of gains as investors have begun to deploy some of the hoard of cash that is sitting on the sidelines. Given the narrow breadth of leadership during 2023 within the equity market as well as the volatility in the bond market, this year has been especially tricky. That said, regardless of the direction of the indexes as we come out of the gate in 2024 keep in mind that over the long-term the direction of the financial markets has been relatively predictable.

As we have noted over the past few weeks, given the intensity and magnitude of the rally in stocks and bonds recently, we believe that both could use a breather and we are hoping that breather will be one retrospectively measured in time rather than value. In our opinion, the first quarter seems an appropriate time for that breather as the taxes on any realized capital gains during 2024 will not be due until April 2025.

· A round trip for the 10-Year U.S. Treasury Note as it ended 2023 at a yield of 3.88%, the same exact rate that it closed at on December 31, 2022. However, the 10-Year did notch an intraday high just above 5.00% and a closing high of 4.98% on October 19.

· The title of one of the main articles on Bloomberg is “‘Everyone Got Burned’: Wall Street Missed the Great Stock Rally of 2023,” the first three words of which is a quote from Andrew Pease, the Chief Investment Strategist at Russell Investments, a firm that manages around $290 billion in assets. Couple this with an article dated December 23, 2022 from CNBC entitled, “Why everyone thinks a recession is coming in 2023” and you can see why we do not pay much heed to market pundits.

· Talking heads speak about “close indexers” like they are some sort of the anti-Christ. I’m sure a lot of them wish they had been closet indexers as the S&P 500 closed up 24.23% for 2023.

· After dropping double digits during 2022, the 60/40 Portfolio has righted itself. After dropping 16.90% during 2022, a proxy for this asset allocation, the Vanguard Balanced Index Admiral Shares (VBIAX) rallied to close up 17.57% in 2023 and looks poised to provide more consistent relative performance in the future as interest rates appear to have peaked.

· The U.S. Economy has become more insensitive to inflation as approximately fifty-eight percent of American homeowners that have a mortgage have one that is under four percent, this according to the Federal Housing Finance Agency (FHFA) and Apollo Global Management..

· Corporate news – In what will most likely be a sign of things to come, The New York Times (NYT) filed suit against OpenAI and its largest backer, Microsoft (MSFT) for copyright infringement. A spokesman from the New York Times stated that “if Microsoft and OPenAI want to use our work for commercial purposes, the law requires that they first obtain our permission.” To us, the lawsuit seems more about the future of how the New York Times may be compensated, if it is all, rather than the granting of permission.

· Upcoming Economic Reports scheduled to be released this week include the following, on Tuesday, November Construction Spending; on Wednesday, November Job Openings and Labor Turnover Survey (JOLTS) along with the December Manufacturing Report on Business from the Institute for Supply Management (ISM); on Thursday, the Weekly Report of Initial Claims for Unemployment Insurance and the December Services Report on Business from the Institute for Supply Management (ISM); and on Friday, November Factory Orders, December Non-Farm Payroll Report and the December Unemployment Rate.

· The current earnings cycle has yet to heat up. However, several companies that may change market sentiment are scheduled to report this coming week. These include – Cal-Maine Foods (CALM), Lindsay (LNN), Schnitzer Steel (RDUS), Conagra Brands (CAG), Greenbrier (GDX) and Constellation Brands (STZ).

This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.

Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”

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