2023 In Review

Business increase arrow graph corporate future growth year 2022 to 2023

The economy: Two factors have been driving the macroeconomic landscape through 2023: interest rates and inflation. In 2022, The Federal Reserve began a rate hiking campaign to combat rising inflation. This year, they continued the hikes in the spring, but have left rates unchanged since July. The chart below suggests the Fed has been succeeding in its battle as the CPI (a measure of inflation) has been slowing. This does not mean prices are lower, just that they are growing at a slower rate. This has been felt by consumers in myriad of ways, especially at the grocery stores where the average bill is up 20% from 2020. Consumers have also seen wages increase by 20% from 2020, but nearly all the wage growth has been eroded by inflation. Although inflation is slowing, higher rates add pressure on consumers in different areas. The elevated interest rates have manifested most visibly in the mortgage and auto industry, as rates on loans are nearly double what they were less than two years ago.

Interest rates and inflation chart

A key metric to watch next year that closely relates to interest rates will be the Unemployment rate. In the event of a weak labor market, the Fed may feel they have slowed the economy enough and could lower interest rates sooner than the market previously expected. This has historically been the case.

Federal funds effective rate chart

Stocks: The equity portion of client portfolios is up very nicely throughout the year, driven by Big Tech stocks leading gains in the first half of the year fueled by hype surrounding Artificial Intelligence. Companies like Nvidia, who are key players in the AI space, saw a surge in their stock prices. In fact, 7 stocks have been coined the “Magnificent 7” due to their drastic outperformance this year as evidenced below. Due to the returns coming from large components of the S&P500 the market overall is up, but the breadth of gains is very weak, with the S&P493 being nearly flat. Due to this, outperformance came from undisciplined, overconcentrated portfolios, which we do not believe in. Recently, a slew of positive economic data in November sparked the best month for stocks (+9.1%) since 2020. The driver of this rally is the expectation that interest rates will be lowered quicker and sooner in 2024, than the market previously expected.

Index performance chart

Bonds: In the bond market, we have outperformed our benchmark throughout the year due to our strategy favoring short-term high-quality bonds. The story with bonds is simple: there are finally opportunities. After years of TINA (There Is No Alternative) to stocks, the rise in interest rates created many opportunities for investors. For the first time in over a decade, bonds may be more favorable than stocks (Argus Research).

Bond V Stock Barometer

For much of the year it was unclear how much higher interest rates would go. Our strategy this year has been to buy high grade bonds with attractive yields, and many we purchased at a steep discount, taking advantage of the fear in the market. Now that the market has caught up with us and expects rates to come down early next year, the yields on bonds have fallen causing prices to increase. The 20-year U.S. Treasury bond yield fell sharply in November, which rallied the price of the bonds 7.8%, the best month in nearly 4 years.

For bonds, the relationship between yield and price is inverse, so when rates increase the price drops, and when rates drop the price increases. So, the expectation of the Fed cutting interest rates in 2024 has been the catalyst behind the rally in both stocks and bonds in the second half of the year.

If interest rates rise chart


Business Continuity and Succession Plan Disclosure Statement

Andrew Hill Investment Advisors, Inc. (“AHIA”) maintains a Business Continuity and Succession Plan (“BCP”) that has been developed with the goal of protecting the health and safety of our employees and maintaining continuity of service for our clients. Our Plan is designed to ensure that we are prepared to operate through significant business disruptions, so that our clients can access their accounts without significant interruption under most circumstances.
Key elements of our BCP include the following:

  • Critical data from our computer systems is backed up daily to geographically remote, secure facilities.
  • All AHIA employees can access its computer data remotely via secure connection. If AHIA’s primary network is not accessible, AHIA maintains replicas of all files and database servers in a geographically remote disaster recovery network available to all employees over a secure connection.
  • We maintain an office evacuation plan and emergency procedures in the event of a disaster affecting our primary office facilities or surrounding area.
  • We maintain an emergency contact list and procedures updated and distributed on a regular basis.

If your account requires servicing during a significant business disruption and we are unable to assist you, please call Fidelity Investments at 1-800-523-1203 and a dedicated team member will be able to assist you. It is impossible for us to anticipate every potential problem that may occur, but we believe our BCP will enable us to conduct business in the event of a variety of possible business disruptions. We review and test our BCP at least annually and it is subject to modification based on changing circumstances and assessment of need.

As a fiduciary, AHIA has certain legal obligations, including the obligation to act in client’s best interest. AHIA seeks to avoid a disruption of service to clients in the event of an unforeseen loss of key personnel, due to disability or death. To that end, AHIA has entered into a succession agreement with The Colony Group, LLC, effective May 24, 2019. AHIA can provide additional information to any current or prospective client upon request to Andrew D.W. Hill, President at 239-777-3188 or [email protected].

Andrew Hill Investment Advisors, Inc.
Privacy Notice

Andrew Hill Investment Advisors, Inc. (“AHIA”) believes it is essential that we maintain the privacy of the nonpublic personal information provided to us and that we obtain in connection with providing our products and services to clients.  AHIA views protecting its customers’ private information as a top priority subject to the requirements of the Federal Gramm-Leach-Bliley Act.  AHIA has instituted policies and procedures to ensure that client information is kept private and secure. 

AHIA limits the use, collection, and retention of such information to what we believe is necessary or useful to conduct our business and to provide and offer clients quality products and services, as well as other opportunities that may be of interest. Information collected may include, but is not limited to name, address, telephone number, tax identification number, date of birth, employment status, annual income, and net worth. 

In providing products and services, we collect nonpublic personal information about our clients from the following sources: 

  • Information we receive from clients on applications or other forms (e.g. investment/insurance applications, new account forms, and other forms and agreements);
  • Information about client transactions with us or others (e.g. broker/dealers, clearing firms, or other chosen investment sponsors); and
  • Information we receive from consumer reporting agencies (e.g. credit bureaus), as well as other various materials we may use to put forth an appropriate recommendation, or to fill a service request.

AHIA does not disclose any nonpublic personal information about its clients or former clients to any non-affiliated third parties, except as permitted by law.  While servicing a clients’ account, AHIA may share some information with its service providers, such as transfer agents, custodians, broker-dealers, accountants and lawyers.  Additionally, we will share such information where required by legal or judicial process, such as a court order, or otherwise to the extent permitted under the federal privacy laws.  

AHIA restricts internal access to nonpublic personal information about clients to those associated persons of AHIA who need to access that information to provide services.  As emphasized above, it has always been and will always be AHIA’s policy never to sell information about current or former clients or their accounts to anyone.  It is also AHIA’s policy not to share information unless required to process a transaction, at the request of a customer, or required by law.

AHIA places strict limits on who receives specific information about client account(s) and other personally identifiable data. As a rule, we do not disclose nonpublic personal information we collect to others. However, because we rely on certain third parties for services that enable us to provide our advisory services to clients, such as our attorneys, auditors, other consultants, brokers, and custodians who, in the ordinary course of providing their services to us, may require access to information, we may share nonpublic personal information with such third parties. 

AHIA may also disclose such information to others upon a client’s written instructions.  Such written instructions may be amended, and/or rescinded at any time in writing.  If a client prefers that we not disclose confidential personal information about them to non-affiliated third parties who provide a product or service that we feel would benefit them, the client may direct us not to make disclosures to such non-affiliated third parties via an opt-out provision.  We restrict access to nonpublic personal information about clients to those persons associated with AHIA, who need access to such information in order to provide our products or services to clients.  We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard clients’ nonpublic personal information. If a client decides to close his/her account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice. 

AHIA reserves the right to change these Privacy Principles, and any of the policies or procedures described above, at any time without prior notice. However, clients will be promptly provided with a current copy of our privacy notice upon material changes or upon request.  Active clients will receive a current copy of our privacy notice at least annually. These Privacy Principles are for general guidance and do not constitute a contract or create legal rights, and do not modify or amend any agreements.   If you have questions about this privacy policy, or if you wish to amend or rescind your written instructions with us at any time, please call us at (239) 777-3188.