Heading into the final few weeks of 2023, markets have come a long way from 2022’s losses, boosting optimism about 2024.

 

Inflation is easing, the economy is proving more resilient than expected, and the S&P 500 is poised to post double-digit gains for the year. That’s despite a banking crisis earlier in the year and high interest rates that depressed sentiment.

 

From the enthusiasm for developments in artificial intelligence (AI) to historic worker strikes, we’ll take a look back at just a few of the forces that shaped 2023, in charts.

 

1. Greatest Banking Crisis Since 2008

 

Back in March, a series of bank collapses led to the largest banking crisis in the past two decades.

 

The failures of First Republic Bank, Silicon Valley Bank (SIVB) and Signature Bank (SBNY) became the second, third, and fourth largest bank failures in U.S. history, eclipsing even the scale of 2008 failures.

 

Depositors’ faith in the banking system was further shaken, and the contagion spread as far as the EU, where Credit Suisse collapsed and was bought by competitor UBS Group on March 19.

 

Their collapse reverberated through markets, with the ICE BofA MOVE Index, which is a proxy for U.S. Treasury volatility, reaching its highest levels since the global financial crisis.

 

2. Biggest Bond Bear Market Ever

 

The market for U.S. Treasurys at one point shed almost a quarter of its value since yields bottomed out in the summer of 2020. That suggests we might have hit the biggest bear market for U.S. Treasury bonds of all time, according to analysts at Bank of America, before they got a boost going into the end of the year.

 

3.  The debt ceiling crisis came down to the wire.

 

On January 19, the US reached its debt ceiling, leading to months of wrangling in Congress. Republicans wanted to see spending cuts, among other concessions, before they would pass a bill to raise the debt ceiling, while President Biden and Democrats argued that the bill should pass without any preconditions. The two sides came to a consensus only days before June 5, the “X date” when the US was projected to run out of money to pay its debts.

 

4.  Flight to Safety Sent Money Market Funds to Record Highs

 

Worries about the possibility of a recession had investors seeking safety, with assets held in money market funds hitting record highs.

 

5. High Interest Rates Weighed on Sentiment

 

Consumer sentiment as tracked by the University of Michigan’s Consumer Sentiment Index lingered near historic lows through much of the year.

 

Market volatility, concerns about high interest rates, and the possibility of a recession weighed on consumers for most of the year, but the resilient economy and easing inflation have lifted consumers' outlook for the future.

 

6. Historic Labor Strikes Rattled Markets

Anxieties about wages keeping up with rising costs also contributed to a surge in organized labor activity in 2023. "Days of idleness” from strikes spiked to their highest level in more than 20 years as workers staged walkouts against major automakers, Hollywood studios, pharmacies, and more.

7. AI Powered Some of the Biggest US Stocks Higher

 

After Microsoft-backed startup OpenAI launched its ChatGPT late last year, some of the biggest players in tech rolled out AI-powered tools, products, and services.

 

Nvidia, Microsoft, Alphabet, Meta, Amazon, and more were among those that benefitted from booming interest in AI this year, with shares up double digits year-to-date.  Nvidia specifically saw its shares rise from $146 at the end of 2022 to over $500 by November 21.

 

8. A Soft Landing After All?

 

At the beginning of the year, many economists projected the Federal Reserve’s anti-inflation rate hikes would lead to a recession. Throughout the year, those predictions were repeatedly postponed.

 

While some still expect the economy might fall into a mild recession in 2024, there is a growing number who think we might just achieve a soft landing after all as strong consumer spending boosted gross domestic product in the third quarter.

 

That’s a wrap for 2023! We look forward to what 2024 will bring.

 

Stay happy, stay safe, stay well!

 

The CM Group