Asset | Q4 2023 | 2023 | 2020 | 2021 | 2022 |
Jasper Capital | 35.13% | 106.58% | 104.42% | 130.48% | -17.49% |
S&P 500 | 11.23% | 24.23% | 16.26% | 26.89% | -19.44% |
Russell 2000 | 13.56% | 15.09% | 18.36% | 13.69% | -21.56% |
QQQ | 14.30% | 53.79% | 47.57% | 26.81% | -33.07% |
VGLT | 10.84% | -0.13% | 15.12% | -6.72% | -31.09% |
SPGSCI | -12.14% | -12.20% | -6.15% | 37.08% | 8.71% |
Gold | 11.61% | 13.16% | 25.09% | -3.62% | -0.35% |
Bitcoin | 56.71% | 155.68% | 304.57% | 59.40% | -64.23% |
Summary: The early part of 2023 saw a rally off technical strength in technology and other long duration equities, which was subsequently bolstered by AI boom mid-year. Prices naturally reacted by late-summer/early-fall when downside momentum on inflation data slowed, concerning some market participants that a return to rising inflation was around the corner. However, a dovish pivot in Fed rhetoric helped lift equities through year end. The recession that was a foregone conclusion among economists at the beginning of the year never materialized. Any money manager foolish enough to trust this bearish consensus ended up on the wrong side of the trade, leading to a number of squeezes throughout the year.
Performance: 2023 was a stellar year for Jasper Capital, with the portfolio achieving a net gain of 106.58%. This year marks the thirdtime in four years that Jasper Capital returned an excess of 100%. Broad equity baskets across the board outperformed. The S&P 500 price index returned 24.23%, the Russell 2000 15.09%, and the QQQ 53.79%. The only benchmark asset that performed better than Jasper Capital was Bitcoin, which remained surprisingly strong all year and returned 155.68%. The portfolio remains concentrated in a small basket of financial assets.
Outlook: Jasper Capital is bullish going into 2024. A few key questions will be top of mind as we navigate the market landscape next year:
- Will we get the credit crisis that so many pundits expected in 2023?
- If a credit event does not occur, will the Fed still loosen conditions?
- If a credit event occurs, how will the Fed respond?
Given the questions above, there are essentially four scenarios in play. If there is no credit event and no policy action from the Fed, rate cuts will need to be priced out, offering a headwind to risk and likely muting any gains for the year. 2024 is an election year, however, and therefore a credit event is not necessary for policy action. It is more likely the Fed engages in some degree of rate cuts in order to support the incumbent candidate. Jobs are potentially on the line here and the incentive structure supports this path. In this scenario, markets would fare better. If a credit event does occur in 202 and the Fed stalls, there is unlikely to be a risk asset that performs well and thus a move to cash or treasuries would be warranted. I see this as the least likely scenario given the Fed’s willingness to jump in during the regional bank failures and the likely to emerge political pressure. If the Fed steps in to support markets, we could see a repeat of the late 90s boom that followed the failure of LTCM. The degree of policy response would directly influence market performance.