2023 market wrap-up

The S&P 500 is ending the year on a nine-week winning streak, its longest such rally since January 2004. Not many anticipated the strong finish from US equities. Here is a recap of the major highlights that shaped the US stock market in 2023.

Bears bare their teeth

There was much doom and gloom predicted in the markets as many investors braced up for a rough year. Sticky inflation, coupled with rate hikes, led to a spur of bearish calls for US equities. Everyone from the strategists at Wall Street banks to rap artist Cardi B was calling for a recession.

Fed steps up inflation fight

The Federal Reserve raised interest rates at the fastest rate since the 1980s. This year alone, the US central bank raised interest rates 4 times, binging benchmark interest rates to 5.5% in July.

Interest rates spark bank run

Interest rates caught several regional banks flat-footed. At Silicon Valley Bank, deposits and the value of its bond portfolio fell sharply, eventually triggering a bank run and evoking memories of the global financial crisis more than a decade ago. First Republic Bank and other lenders also collapsed. The bank run also had a global dimension as UBS acquired Credite-Suisse after the Swiss government brokered a deal to rescue the century-old bank from crisis.

IPO freeze

Despite the tech rally in 2023, there was a dearth of new opportunities for public investors during the year. After a dismal 2022 for tech IPOs, very few names came to market in 2023. The three most notable IPOs — Instacart, Arm and Klaviyo — all took place during a one-week stretch in September.

AI fever grips the market

Few anticipated that a mania over artificial intelligence would help power stocks to new heights. A blockbuster earnings report from Nvidia (NVDA:NASDAQ) in May crowned the graphics chip maker as the stock market’s next star and launched a frenzy around AI that persisted for much of 2023. Nvidia more than tripled to lead the S&P 500.

Magnificent 7 replaces FAANG

After last year’s 33% plunge, the tech-heavy Nasdaq finished 2023 up 43%, its best year since 2020, which was narrowly higher. The Magnificent Seven replaced FANG (or FAANG) as the favored nickname for the market’s leaders.

Nvidia, Apple (APPL:NASDAQ), Microsoft (MSFT:NASDAQ), Alphabet (GOOG:NASDAQ), Amazon (AMZN:NASDAQ), Tesla (TSLA:NASDAQ) and Meta Platforms (META:NASDAQ) swelled to represent about 30% of the S&P 500’s market value and were responsible for much of its 2023 gains.

Fed dials down on interest rates

In the final weeks of the year, euphoria set in when the Fed indicated it would likely shift to trimming interest rates, rather than raising them. The dovish stance of the Fed sparked an “everything rally” pushed up prices of assets—from gold to bitcoin to risky corporate bonds and investments in far-reaching corners of the stock market.

Markets defy bearish calls

The S&P 500 finished the year up 24%, just 0.6% from its January 2022 record. The Dow Jones Industrial Average advanced 14% to top 37,000 for the first time and set seven record closes in the final days of 2023. A mania surrounding artificial intelligence and big technology stocks sent the Nasdaq Composite soaring 43%, its best year since 2020.

Recession callers silenced

Despite aggressive rate hikes, the economy did not go into a recession as many predicted. Inflation continued to fall, consumers kept spending, and the unemployment rate fell to 3.4%, the lowest level since 1969.

2023’s biggest winners

Leading this year’s gains is none other than Nvidia. The poster child of the artificial intelligence arms race has rallied 236% and is on pace for its second-best year ever. Meta Platforms is the second-top performer, with shares up 194%, and the social media giant is on track for its best year ever.

Crowdstrike (CRWD:NASDAQ), Advanced Micro Devices (AMD:NASDAQ) have rallied about 141% and 110%, respectively. Palo Alto Networks (PANW:NASDAQ), DoorDash (DASH:NASDAQ), MongoDB (MDB:NASDAQ) and Tesla round out the list of companies that have seen shares at least double in 2023, with Broadcom (AVGO:NASDAQ) and Zscaler (ZS:NASDAQ) following close behind.

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