Q4-2023 Client Commentary

January 16, 2024

Dear Valued Client,

As we reflect on the dynamic market conditions of the past year, we are pleased to share an overview of the performance of your portfolio managed by Wisconsin Capital Management.

In a year characterized by notable volatility and macroeconomic shifts, selected domestic equity markets displayed impressive returns. The S&P 500 demonstrated a total return of 26.29%, the NASDAQ surged over 43%, and the Dow Jones Industrial Average advanced more than 13%. Similarly, international stock markets exhibited strength, with the MSCI EAFE international stock index rising over 15%. Despite a year-over-year increase in short-term interest rates, Intermediate Bonds, as tracked by the Bloomberg Intermediate US Government/Credit Bond Index, showed a positive return of 5.24%.

It is worth noting that despite these robust returns, the S&P 500 only returned to its starting point at the beginning of 2022. The international stock index, the NASDAQ, and the bond index still reflected negative returns for the two years combined.

The year began with the Federal Reserve's commitment to raising short-term interest rates as part of its strategy to combat inflation. By March, the consequences of this policy became apparent, as several banks faced significant challenges due to asset and liability mismatches, resulting in insolvency scares. Fortunately, swift interventions prevented any depositors from incurring losses.

As the year progressed, supply bottlenecks and inventory corrections from the previous year normalized, leading to a gradual abatement of inflation. Many market commentators now speculate that the Federal Reserve's mission to curb inflation is nearing completion, advocating for a more accommodative policy in 2024 with reduced borrowing costs.

However, it is crucial to approach such forecasts with caution, considering the unpredictability of the future. Expert macro forecasts have frequently proven inaccurate, as seen in their predictions of a recession last year and their failure to anticipate the post-pandemic surge in prices and other market developments.

Wisconsin Capital Management and the Plumb Funds maintain a prudent and independent approach to investment management. We believe in the value of in-depth research to identify individual investments that offer positive relative returns and, more importantly, positive absolute returns. Unlike some salesperson focused asset gathering "wealth management" firms that lean towards index funds, our focus remains on seeking companies with disruptive growth, sustainable business plans, and market leadership without reliance on financial leverage.

We are grateful for the opportunity to demonstrate that effective financial, tax, and estate planning can include the benefits of a well-managed portfolio of individual securities. As we move forward, we remain dedicated to providing you with personalized investment strategies that align with your financial objectives.

On behalf of everyone at Wisconsin Capital Management, we extend our best wishes to you and your family. Thank you for entrusting us with your financial well-being.

Best Regards,

Opinions expressed are those of the author and are subject to change, are not intended to be a forecast of future events, a guarantee of future results, nor investment advice. References to other mutual funds should not be interpreted as an offer of these securities.

Earnings Growth is not a measure of a securities’ future performance.

It is not possible to invest directly in an index.

The Dow Jones Industrial Average (DJIA) is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange (NYSE) and Nasdaq.

The MSCI EAFE Index is a stock market index that measures the performance of large- and mid-cap companies across 21 developed markets countries around the world. Canada and the USA are not included. EAFE is an acronym that stands for Europe, Australasia, and the Far East.

The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. The Nasdaq Stock Market is an American stock exchange based in New York City. It is the most active stock trading venue in the U.S. by volume and ranked second on the list of stock exchanges by market capitalization of shares traded, behind the New York Stock Exchange.