Dimensional's Takes on 2023 Industry Topics

January 02, 2024

Every year, Dimensional produces a range of resources and analysis to help financial professionals and individuals make informed investment decisions.

In 2023, we shared insights directly connected to various happenings around the world, from government debt and bank closures to topics like artificial intelligence and the Magnificent 7 stocks.

Here is a look at several original pieces published by Dimensional this year around some of the industry’s hottest topics.

Debt Ceiling and Debt Downgrade

In January, the US hit its debt ceiling, triggering "extraordinary measures" by the Treasury Department to allow continued servicing of existing debts and obligations. The headlines left investors wondering how a breach of the debt ceiling could impact their investments. 

In “Mind over Matter: Perspective for Investors on the US Debt Ceiling,” Dimensional emphasized sticking to a sound investment plan rather than trying to predict what would happen with the debt limit and the implications for investors.

In August, Fitch Ratings downgraded the US government’s credit rating, triggering another potential worry for investors. The immediate impact appeared to be minimal as US debt markets seemed to barely react. That, Dimensional explained in “Real-Time Ratings Are More Dynamic than Fitch’s,” was likely due to the forward-looking nature of markets.

Additional resources:

Bank Closures

Several high-profile regional banks collapsed in 2023, beginning in March when regulators took control of Silicon Valley Bank as a run on the bank unfolded. Just two days later, regulators took control of a second lender, Signature Bank. The back-to-back collapses resulted in increased anxiety as many investors eyed their portfolios for exposure to these and other regional banks.

In “When Headlines Worry You, Bank on Investment Principles,” Dimensional stressed the importance of focusing on your investment plan rather than rummaging through your portfolio looking for potential trouble spots when news headlines cause concern.

The Magnificent 7

For much of the year, the Magnificent 7 stocks—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla—captured the focus of investors as these stocks outpaced the broader market.

As companies grow to become some of the largest on the US stock market, their returns can be impressive. But, as Dimensional pointed out, not long after joining the top 10 largest by market cap, these stocks, on average, have lagged the market.

In his essay “The Stock Market vs. Stocks in the Market,” Dimensional Founder and Chairman David Booth notes that a properly diversified portfolio can help ensure that investors reap the rewards of these top performers while also preventing the risks that come from being overly concentrated in a single stock, sector, or country when its performance is poor.

Investment Implications of Artificial Intelligence

This year’s developments in artificial intelligence came with a fair share of news headlines and water cooler conversations. Investors and financial professionals alike debated everything from whether AI will help stock pickers make accurate predictions to which stocks will benefit most from the technology.

While recognizing that artificial intelligence has great promise, Dimensional reminded readers that AI has been around for years and emphasized the firm’s belief that there’s no reason to think it offers investors predictive capabilities. In fact, artificial intelligence pales in comparison with the informational content of the market’s AI—aggregate intelligence.

In addition to aggregating information, the market is forward-looking, reflecting investors’ best estimate of an asset’s value in relation to future expected returns. The market adjusts as new information comes in, setting prices that buyers and sellers agree are fair for millions of stocks and bonds every day. There’s no evidence that anyone can consistently outsmart the market—not even artificial intelligence.


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