U.S. stocks ended the quarter with a forward price-to-earnings ratio close to 20, significantly higher than three months earlier. Bond yields increased significantly during the year, yet the fourth quarter's rally reduced the U.S. 10-year Treasury yield to 3.87%.

Economic data indicates that some aspects of the U.S. economy are more consistent with a recovery than a recession. Manufacturing activity, housing prices and the Conference Board’s Index of Leading Indicators are all positive signs. A recession is much less likely in 2024 than last year.

However, fourth-quarter market gains may have been excessive, and we could see some volatility in early 2024 as the markets assess whether their optimism at the end of 2023 was warranted.

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