Investment Commentary: Q4 2023

With disinflationary trends seemingly taking hold, the Federal Reserve began to signal during the fourth quarter that monetary easing was probable over the course of 2024. As a result, equity markets rallied to historic highs into the year-end amidst the prospect of “easier” financial conditions. The Nasdaq and Russell 2000 led the way in the fourth quarter, finishing up 14.03% and 13.56%, respectively, while the more narrowly focused Dow finished up 13.09%.

While the rally helped most stocks, large caps equities and the technology sector led the way for the FY23, buoyed by the exuberance surrounding AI applications and the required technology infrastructure. Information technology and communication services sectors were up 57.8% and 55.8% for the fiscal year, while utilities and energy were down 7.1% and 1.5%, respectively, as inflation and energy prices fell. Overall inflation was relatively tame, increasing approximately 4% over the year - its slowest pace in two years. With the inflation outlook remaining subdued, the Federal Reserve at its early December meeting intimated that as many as three interest rate reductions might occur during 2024 and was a major shift from their previous outlook. Bond yields, which had reached 16-year highs in mid-October, reversed significantly during the quarter, with the 10 Year Treasury falling nearly 100 basis points from its highs.

The Community Foundation’s Corporation returned 6.0% in the fourth quarter of 2023 and for the year ended posted a return of 12.7%, which lagged its market benchmark of 13.8%. The portfolio’s public equities finished the year up 21.6% or slightly behind the torrid equities’ pace that moved the benchmark up 22.2%. The hedge funds were in-line with their market benchmark in the fourth quarter and finished the year with a net return of 13.2% or almost 2.7% more than the HRFI hedged equity index that advanced 10.5%. The private asset sleeves of the portfolio fared less well during the year, with private equity giving back almost 7.9%. Private real assets also underperformed, drawing down almost -4.3% for the year as office buildings and low energy prices were detrimental.

Questions? Contact A.F. Drew Alden
SVP and Chief Investment Officer, The Community Foundation for Greater New Haven;
President and CEO, TCF Mission Investments Company

*The Corporation is a Connecticut registered investment adviser and part of The Community Foundation for Greater New Haven.

Learn more about The Community Foundation's investments.