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Kuby’s Commentary

The Bulls are Back

Dec 26, 2023

A Recession That Never Was

For most of 2023, the consensus amongst the talking heads of the market was that there was an impending recession and that interest rates would stay higher for longer to combat stubborn inflation. On the other hand, the economic data kept telling quite a different story, one of a resilient economy with rapidly abating inflationary pressures. Over the few months, consensus has progressively approached reality, with the Reuters “Morning Bid” on Friday summarizing the year, “A recession that never was, a consumer that has proven almost bulletproof in the face of high inflation and interest rates, an unexpected boom in AI-linked stocks and, supercharging the market in the final weeks of the year, the anticipation of a steep drop off in borrowing costs in 2024.” Indeed, the “Goldilocks” rally carried the market comfortably into the “Santa Claus” rally, with the market posting its eighth straight week of gains. Small caps have been the biggest winner during this recent stage, following two years of painful underperformance that resulted in historic relative under-valuations in that universe of equities.

The once narrow rally continued to broaden as gainers outnumbered losers by a factor greater than 2-1, and the Russell 2000 added another 2.5%, the Nasdaq Composite +1.2%, and the S&P 500 +0.8%. The Dollar weakened, gold rallied, and the yield on the 10-year Treasury inched down three basis points to 3.9%. The yield on the 2-year Treasury, which topped 5% a few months ago, settled in at 4.3%. These lower interest rates and full employment and healthy household balance sheets provide an excellent backdrop for the U.S. economy in 2024. The positive trends in the economic data were evident on Friday as the Federal Reserve’s primary inflation rate, the core PCE price index, showed that core price pressures continued to cool more than expected in November, with core inflation at a 1.9% annualized run rate over the past six months. The Fed’s preferred gauge confirmed our “higher than necessary” theory on Fed interest rate policy, and the report included no slowdown in shelter inflation yet. We anticipate shelter inflation slowing in the first half of 2024, which likely greenlights Fed easing.

The good cheer has even spread into the Chicago Sports Scene, with both the Bulls and Bears showing signs of a bright future. On Wednesday night, North Star Team members Eric and Brooke Kuby enjoyed watching the Bulls dispense of the lethargic Lakers at the United Center. Once again, it reinforces the truth that LeBron is not Michael Jordan, as the Bulls always were energized whenever MJ was on the court. Meanwhile, the Bears continued to show promise, beating the Arizona Cardinals 27-16 at Soldier Field. Although only 6-9, the Monsters of the Midway could easily be 10-5, for the inexplicable fourth-quarter collapses in four games. We stand with Justin and believe the Bears will hold onto those leads as he matures.

Happy Holidays

Trading should be quiet with the markets closed on Monday in observance of the Christmas holiday and with no significant economic releases on the calendar.

The stocks mentioned above may be holdings in our mutual funds. For more information, please visit

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates (“North Star”) may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one’s investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation’s Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

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