Image Source: Pixabay

The past week was a relatively calm one. Many investors tried to lock in gains or engage in tax loss harvesting. That said, I did neither. As a long-term dividend growth investor, I don’t typically engage in year-end selling for gains because I buy to hold. However, I occasionally sell shares or a position for tax loss harvesting, especially if the stock’s fundamentals or competitive position changes.

I sold 3M (MMM) in the past because of these general reasons. Overall, investors must do what is best for them, but buying or selling too much detrimentally affects returns.

It seems like complexity did not work well for most investors. For retirement portfolios, buying and holding low-cost index funds worked wonders for future retirement balances. The S&P 500 Index climbed 26%+, while the Nasdaq gained even more.

Following Warren Buffett’s advice and owning a two-fund portfolio could possibly be an excellent option. It’s simple and seems to work, and arguing with Buffett is seemingly a losing proposition over time. Another easy choice is the Boglehead’s three-fund portfolio.

Stock Market Overview

Despite being calm, it was still a mixed week, as investors sold off stocks to lock in gains for the year. The Dow Jones Industrial Average finished first, ending the year on a high note after a volatile 2023. It was followed by the S&P 500 Index and the Nasdaq Composite. Only the Russell 2000 had a loss for the week.

Eight of the 11 sectors gained this week. The Consumer Defensive, Utilities, and Healthcare sectors were the top performers. However, the Basic Materials, Consumer Cyclical, and Energy sectors were the worst performers with large losses.

Oil prices fell again and finished the week at ~$71.30. Demand remains weak, supply is strong, and the quantity in storage is robust. The VIX declined ~5%+, which is still well below its long-term average. Gold gained again and rose to ~$2,072 per ounce, which is nearly a record.

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Source: Stock Rover

The year 2023 was one of the best for technology stocks in a long time. The Nasdaq Composite finished the year with a +44.5% gain, and the even more concentrated Nasdaq 100 climbed nearly 55%. The other indices finished the year with positive returns, too. The S&P 500 Index was up +26%, the Russell 2000 was up +16.8%, and the Dow 30 ended the year at +13.7%.

In addition, ten of the 11 sectors finished the year with positive returns. The three best-performing sectors overall are Technology, Communication Services, and Consumer Cyclical. But the worst-performing sectors overall are Consumer Defensive, Energy, and Utilities. Only, Utilities ended 2023 with a negative return.

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Source: Stock Rover

The dividend growth investing strategy completed the calendar year with gains. The table below shows their performance by category.

Source: Stock Rover

Stock Market Valuation This Week

Finally, the S&P 500 Index trades at a price-to-earnings ratio of 26.35X, and the Schiller P/E Ratio is about 32.27X. These multiples are based on trailing twelve months (TTM) earnings. The long-term means of these two ratios are approximately 16X and 17X, respectively. 

Overall, the market is still overvalued despite the recent correction, the bear market, and the recent rebound seen in the markets. Earnings multiples of more than 30X are overvalued based on historical data.

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