by Brian DeChesare Comments (5)

2024 Investment & Market Updates: How to Reverse a Painful Year with AI Hype and a Frenzied 2-Month Rally

Investment & Market Updates: 2024 Edition

The markets in 2023 were almost a complete reversal of 2022, and hardly anyone – me included – saw it coming.

My portfolio did “OK” (up 10% for the year), but it greatly underperformed the S&P 500, which was up 24%.

On the other hand, I was only down 9% in 2022 vs. a 19% drop for the S&P, so both the index and my portfolio are now back to “early 2022” numbers.

This result is disappointing because it ends my 4-year streak of matching or beating the market, and it’s all because of my bad decisions.

With better decisions, I could have been up 15 – 20% for the year and slightly above my levels from 2 years ago.

I’ll start with my current portfolio and why I did well in 2019 – 2022 but lost ground this past year:

Investment & Market Updates: My Current Portfolio

Here it is as of January 1, with differences vs. January last year in brackets below the chart:

2024 Portfolio Allocation

  • Equities: 54% [Up 22%]
  • Real Estate (Equity Funds + Owned Properties): 12% [Down 3%]
  • Gold: 8% [Down 2%]
  • Cash & Savings: 5% [Down 6%]
  • Angel Investments: 5% [No change – recording these at historical cost]
  • Crypto: 5% [Up 5%]
  • U.S. Treasuries: 4% [Down 15%]
  • Natural Resources & Commodities: 3% [Down 2%]
  • Silver: 3% [Unchanged]
  • Real Estate Loans: 1% [Unchanged]

Looking at this split, my performance makes intuitive sense:

  • With 50%+ allocated to equities, you’d expect roughly 50% of the S&P’s gain (I didn’t quite get this due to allocations to international, value, and dividend stocks).
  • But my real estate investment funds were down ~10%, which hurt.
  • Gold did well (up around 13%), but I had 10% or less in it the whole time.
  • I bought crypto again and was up around 50%, but the percentage allocated was too small to make a big difference.

This current allocation and my changes might look reasonable on the surface.

But to explain why they didn’t work well, I need to outline why performance was much better in previous years:

Past Performance Does Not Indicate Future Results

In previous years, my main portfolio was not particularly aggressive.

I had way too much in cash (sometimes 20% or more!) and far too little in equities.

However, I still outperformed because I made small bets on risky assets that did extremely well and were meaningful percentages of my total assets:

  • I bought Bitcoin for under $1,000 in 2013 and under $10,000 in 2020 and sold it for $30,000 to $50,000 in 2021 – 2022.
  • I made a few angel investments in the mid-2010s that had successful exits in later years (10x+ multiples).
  • When the markets rallied after the initial COVID sell-off in March 2020, I put more cash into equities and real estate. More importantly, I did not “panic sell” when everything crashed.
  • And I used some crypto proceeds to buy a condo whose price rose by 50% over 2 years.

Finally, we ran several promotions and price increase sales on BIWS in 2017 – 2021, giving me more cash to invest, which helped when the market was frothy.

Investment & Market Updates: What Happened in 2023

Unfortunately, nothing above was a major factor over the past year.

Nothing generated 10x, 30x, or 50x gains, I didn’t buy any real estate that suddenly shot up by 50%, and while I didn’t “panic sell,” I timed my trades poorly.

If I had to summarize the year in one phrase, it would be:

“The right ideas, but the wrong execution.”

On paper, I made the correct decisions:

  • I consolidated my brokerage accounts into 2 main providers because managing many different accounts had become a pain.
  • I sold most of my U.S. Treasuries.
  • I cut cut my allocations to commodities and real estate.
  • And I reallocated these proceeds into crypto and equities and put in some excess cash.
  • I traded individual stocks and had good results with few merger arbitrage and special situations ideas.

But I made most of these changes too late or invested too little to make a huge impact.

For example, I bought crypto again in March after swearing it off and selling everything following the FTX debacle a few months before.

I could see the rally and expected it would be a good period for speculative assets.

But I only put in a small percentage of my total assets – so even a 50% gain wasn’t enough to save my entire portfolio.

I should have done this in January and put in ~15% of my total assets rather than ~3%.

Within equities, I started the year with many value-oriented, international, and high-dividend stocks.

I could see this mix wouldn’t work as well in 2023, but I waited until the middle of the year to reallocate into “Total Market” indices that more closely track the S&P.

You can see the problem with this approach:

S&P 500 vs. Portfolio Reallocations

For much of the year, I found myself saying, “Wait, what did I do? Did I make a huge mistake by reallocating when things have been flat-to-down since then?”

But then November and December came along and saved me and everyone else.

I Find Your Lack of Faith Disturbing

Zooming out, the broader problem is that I lacked conviction in many trades.

Historically, I performed best when I went against the current market consensus – but over the past few years, I fell into the trap of “going with the flow” and not acting consistently.

For example, in January 2022, I sold most of my crypto because I expected the looming rate hikes to hurt virtually every asset: crypto, stocks, bonds, and maybe even gold.

Instead of waiting for that to play out, I immediately reallocated the proceeds into value-oriented equities.

And sure, value stocks held up better in 2022 than speculative growth stocks, but it was still a dumb move because it went against my market view (that all assets would fall).

A related issue has been my poor cash management.

It’s fine to have a high percentage in cash at times, but it works only if you use it effectively by buying dips and market corrections.

But I did the opposite: When the market reached a low in Q3 of 2022, I stupidly sold ~20% of my equities – even though I still had a sizable cash balance and could have bought more.

The solution here is simple: Allocate based on rules rather than sentiment.

For example:

  • 10% Correction: Shift 2% of total assets from cash and UST into equities.
  • 20% Correction: Move 5% into equities.
  • 30% Correction: Shift 8 – 10% and sell gold/silver if necessary.

Investment & Market Updates: What’s Coming in 2024?

I’ll be honest: I do not have strong convictions about the markets for this year.

Two major factors drove the markets last year: on-again/off-again hopes for rate cuts and AI hype around Nvidia, Microsoft, and other tech companies after ChatGPT’s release.

But these expectations for rate cuts have already been priced in, and these companies need to start showing substantial revenue growth from AI soon to keep benefiting.

So, I don’t think we’ll see another 24% gain for the S&P.

I expect far more volatility than in 2023, which was fairly calm except for the Credit Suisse and Silicon Valley Bank failures in March.

The S&P and NASDAQ are way ahead of themselves and seem to be pricing in multiple rate cuts and a “soft landing” – a bit of a contradiction.

If you forced me to make a prediction, I would expect a relatively flat year in the range of +5% to –5% for the entire index.

I am still bullish on gold and commodities because they are cheap next to equities, so I have almost 15% allocated to them.

Structurally, the U.S. and most developed countries spend like drunken sailors and incur huge deficits each year, which means more money printing (despite the higher interest rates and attempts at tightening).

And never-ending money printing benefits gold, equities, and crypto, which explains my current allocation.

I now have over 50% in equities not because I think they’re “cheap” or set for huge gains but because most alternatives seem even worse:

  • Bonds have already priced in rate cuts; performance will be terrible if rates rise.
  • Cash now earns 4 – 5%, but that’s barely above the dividend yield on many stock indices.
  • Real estate is doing poorly due to high office vacancies, inflation, and higher rates.
  • Startups have been hit hard the past few years, and exits do not look promising.

Within equities, I have ~40% allocated to international stocks, which is my way of slightly betting against continued U.S. outperformance.

This trade has not worked well over the past 10 – 15 years, but I think international stocks will eventually outperform (BlackRock has a good explanation here).

That said, I’m no longer playing the value vs. growth game; I’m just using various indices and ETFs to cover the entire U.S. and non-U.S. markets.

With my luck, we’ll probably get a 30% correction in 2024.

Hopefully, I won’t “forget” to shift all my cash into stocks when that happens.

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

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  1. Appreciate this piece.

  2. How did the condo you invest in return 50%? Was it a property in Singapore?

    1. Look at Miami home prices between 2020 and 2022.

      1. Yep that’s the other one I guessed; made a comment with a hyperlink to some reference but it is awaiting moderation…

        1. Yes, we don’t allow outside links in the comments due to massive problems with spam (~99% of comments with links are spam or bot-generated).

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