2023 Q4 - Email - Cloud Capital

Cloud Capital - Market Commentary – 4Q 2023
Dear Clients and Friends of Cloud Capital,
I hope this message finds you well. We are pleased to share with you a market update on the past
quarter and a deeper dive looking back on the past year.
As we step into a promising 2024, it is essential to take a moment to reflect on the past market conditions
as well as look forward to the opportunities and challenges that lie ahead in the ever-evolving financial
landscape.
Read below for detailed information on the markets over the past quarter. Please do not hesitate to reach
out if we can be of assistance to you in the new year.
Wishing you a successful 2024,
Sean Sternbach
Chief Investment Officer
Cloud Capital
450 Alaskan Way S, Suite 206
Seattle, WA 98104
O: 800-795-4303
[email protected]
*Investment Advisory Services offered through Cloud Capital Management, LLC dba Cloud Capital*
Economy
The US inflation rate declined by 51% from 6.45% to 3.14% in 2023. US core inflation declined from
5.71% to 4.01%. We can see in the chart below that inflation is trending towards its 10-year historical
average of 2.74%
The US unemployment rate has increased by 5.7% in the past year to 3.7%. The US labor force
participation rate increased 0.50% to 62.5%. Since 1948 the unemployment rate has averaged 5.7% and
over the last 10 years has averaged 4.8%.
Historically, the labor force participation rate peaked at ~67% and has been in a downward trend
since 2000. It is now starting to normalize to pre-pandemic levels.
Historical US Unemployment Rates
The Fed funds rate may have peaked. While we do not anticipate an additional increase in interest rates
from the Fed, it is not yet clear how the Fed will act in Q1. We anticipate decreases in the Fed funds rate
starting in the second half of this year.
Over the fourth quarter, the US treasury yield curve has come down and as we look back 10 years, we
can see that we remain above the historical average. Yet we are now trending back toward the historical
average.
Mortgage rates are declining from their peaks. The 30-year mortgage rate fell from its high to 6.61% and
the 15-year mortgage rate fell from its high to 5.93%.
US existing home median sales price fell from its high to $387k and US median sales price for new
homes fell to $434k.
US consumers continue to spend. US credit card debt, mortgage debt, auto loan debt, and total
household debt have all reached an all-time high.
Events from the Past Year
• Silicon Valley Bank closed by regulators. FDIC takes control.

• Chinese spy balloon shot down off US coast.
• WHO declares COVID-19 pandemic emergency over.
• Fitch slashes US credit rating to AA+ from AAA.
• UAW strikes at plants owned by GM, Ford, and others.
• Israel declares war on Hamas after surprise assault from Gaza.
• Job openings fall to 28-month low as US labor market cools
• S&P 500 ends the year strong just shy of peak levels with a 26% total return.
Fixed Income
Interest rates generally decreased in the US Treasury market for the quarter.
On the short end of the yield curve, the 1-Month US Treasury Bill yield increased 5 basis points (bps) to
5.60%, while the 1-Year US Treasury Bill yield decreased 67 bps to 4.79%. The yield on the 2-Year US
Treasury Note decreased 80 bps to 4.23%.
The yield on the 5-Year US Treasury Note decreased 76 bps to 3.84%. The yield on the 10-Year US
Treasury Note decreased 71 bps to 3.88%. The yield on the 30-Year US Treasury Bond decreased 70
bps to 4.03%.
In terms of total returns, short-term US treasury bonds returned +3.21% while intermediate-term US
treasury bonds returned +3.99%. Short-term corporate bonds returned +4.12% and intermediate-term
corporate bonds returned +5.86%. (Source: 1. Bloomberg US Treasury and US Corporate Bond Indices).
The total returns for short- and intermediate-term municipal bonds were +3.53% and +6.53%,
respectively. Within the municipal fixed income market, general obligation bonds returned +7.79% while
revenue bonds returned +8.15%. (Source: 2. Bloomberg Municipal Bond Index).
Additional information on the fixed income markets can be found in the attachment.
Equities
The US equity market posted positive returns for the quarter and outperformed both non-US developed
and emerging markets.
• Value underperformed growth within large caps and outperformed within small caps.
• Small caps outperformed large caps.
Stock market indices are near all-time highs.
There is additional detailed information on the equity markets that can be found in the other
attachment.

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Cloud Capital - Market Commentary – 4Q 2023

Dear Clients and Friends of Cloud Capital,

Wishing you a successful 2024,

Chief Investment Officer

450 Alaskan Way S, Suite 206

Events from the Past Year

• Silicon Valley Bank closed by regulators. FDIC takes control.

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