The Year-In-Review and Looking Ahead to 2024

We’re big advocates for year-end planning. Sitting down to reflect on the past year allows you to enter the next with renewed focus. It helps you better identify key opportunities while putting your energy into the right areas. These end-of-year reflections can also enhance discussions you have with your advisor regarding your wealth plan for the upcoming year. 

To aid you in this process, we’ve taken some time to review key themes that appeared throughout 2023 that had an impact on financial planning. In this article, we’ll go through these themes and talk about some of our key takeaways from 2023. 

6 Key Themes From 2023

1. Interest Rates Continued To Rise

Interest rates were the highest in 22 years during 2023 and we saw month-on-month increases. This meant many people across the country held back on some bigger-ticket purchases. This was in part due to the Federal Reserve raising rates to help slow the economy and combat inflation. It was also due to an increase in available bonds and a lack of buyers. 

2. The Price of Residential Real Estate Continued To Rise

2023 saw a steady increase in house prices across the U.S. This was despite a rise in mortgage rates. The main factor driving these prices up is a lack of homes to meet demand. This also led to an increase in the construction of new builds in 2023.

3. Inflation Is Falling 

Measures put in place by the government to combat inflation are taking effect as inflation did slow down in 2023. There is however some way to go and the government has stated that inflation levels will not be at the ideal 2% until 2026. To help counter the impact this has on individuals and families, the government has made some tax changes, and cost of living increases have been made for social security, annual exclusion gifts, and retirement plan contributions. 

4. Top 7 Stocks Continue To Lead Market Performance

Apple, Microsoft, Alphabet, Amazon.com, Nvidia, Tesla, and Meta Platforms, also known as the “Magnificent 7” continued to dominate the market throughout 2023. These stocks made up 29% of the S&P 500's market cap, which is the largest portion ever dominated by such a small number of different stocks. 

5. Massachusetts Increased Estate Tax Exemption

2023 also saw a $1 billion tax relief package implemented in Massachusetts as part of an Act to make the state more affordable and competitive. An important element of this bill impacted estate tax, with the estate tax exemption for the state doubling from $1 million to $2 million for those who die on or following January 1, 2023. 

Massachusetts residents and non-residents with property also no longer need to pay Massachusetts estate tax. However, if your property is valued at over $2 million you will still need to pay tax. 

5. Geopolitical Issues Dominated the News Cycle

2023 has been a turbulent year for geopolitical issues and events like the war in Ukraine and the war in Gaza have received a lot of attention in the press. Geopolitics can impact organizations in several ways. Supply chains can be impacted and sanctions placed on countries can have knock-on effects. As such, geopolitical tensions have kept boards and investors on their toes throughout 2023 and given them more to think about. 

Takeaways  

While inflation improved in 2023, inflationary pressures were still present and people had to strike a balance between their expenses and income. This meant making sure their budgets were sustainable and aligned with their financial plans while still allowing for quality of life. 

For some, there was also the realization that a well-balanced life involves more than just looking after their finances. As such, many people took the opportunity to assess their work-life balance. This included exploring alternative income streams through side hustles or freelancing, to find fulfillment and financial stability without sacrificing personal time and relationships.

There are other important learnings we can take from the themes we saw cropping up. These include the following: 

• Real estate market fluctuations highlighted the importance of a balanced approach to property investments. Individuals needed to consider not just the financial return but also how real estate holdings fit into their overall life goals and priorities.
• Diversification and balancing risk and reward was a key strategy in investment planning. By spreading investments across different asset classes, investors aimed to achieve a well-balanced portfolio that could weather market turbulence while still meeting long-term financial objectives.
• Retirement planning took on a new level of importance in the context of a balanced life. It meant not only accumulating savings but also thinking about how to retire comfortably while enjoying life. The pursuit of a well-balanced retirement involved finding ways to maintain financial security while allowing time for personal interests, travel, and other pursuits.
• Tax and estate planning were prioritized as part of achieving a balanced life. By optimizing tax strategies and ensuring an effective estate plan, individuals sought to provide financial stability for themselves and their loved ones, reducing stress and uncertainty. 

Conclusion 

There was a lot to learn from 2023. It was a year of ups and downs. Ultimately, this year reinforced the idea that a well-balanced life encompasses more than just financial prosperity. It is about achieving equilibrium between financial security, personal fulfillment, and a healthy work-life balance, and ensuring that financial decisions are made to support overall well-being.

To reflect further on the year and to put this knowledge to good use in 2024, we recommend catching up with your Entrust Wealth Partners advisor. Contact them directly or reach out to us at (860) 838-3730 to get the conversation started.