How much did the US stock market really earn in 2023? The Nasdaq 100 index soared, achieving its best performance in 24 years. The S&P 500 rose 26.3%, and the Dow Jones also increased by 16.1%. However, this wave of market activity is somewhat strange—at the beginning of the year, everyone was saying a recession was on the way, yet it never came, and the Q3 GDP actually rose by 4.9%.

The most outrageous thing is that the "Seven Swordmasters of Technology" (the likes of Apple, Microsoft, Nvidia) have surged ahead with a return rate of 107%. In contrast, defensive sectors (healthcare, consumer staples) have been directly pressed down. Growth stocks have completely outperformed value stocks, with the lead being the largest since the 2008 financial crisis.

How to proceed in 2024? The key word is "interest rate cuts". The Federal Reserve raised rates by 525 basis points last year, and the market is betting on 7 rate cuts this year (25 basis points each). Inflation has dropped from 4.9% at the end of 2022 to 3.1% in November, and the unemployment rate remains at historically low levels. The probability of a soft landing (moderate economic growth + falling inflation) is increasing.

Small-cap stocks have rebounded fiercely in the last two months, but there are signs of fatigue from a technical perspective. Next, it is likely that the suppressed sectors such as small-cap, finance, and real estate will take turns performing, while the tech giants' solo act may need to give way. The risk is that the market's expectations for interest rate cuts may be overly optimistic.