Many Wall Street and other forecasters expected 2023 to be a bad year for the economy. Almost all of them predicted a recession in 2023, but reality proved them wrong. There was a lot going on in 2023 and it was certainly not the easiest time for the economy. Overall, however, 2023 was a very successful year for equities, unemployment and other niches in the market. What comes next? Will 2024 be the same or similar to 2023 or will we have a recession? Let’s take a look at what the experts are saying about 2023 and what will happen in 2024.
An eventful year 2023
2023 was truly an exciting year for the economy, with many ups and downs. The year started with an impressive impact of Chat GPT in 2022 and the continuous development of AI. However, experts began to question how these programs would handle the privacy of their users and what the impact of these artificial intelligences could be. A quote from Musk in April was:
“AI is more dangerous than, say, mismanaged aircraft design or production maintenance or bad car production, in the sense that it is, it has the potential — however small one may regard that probability, but it is non-trivial — it has the potential of civilization destruction”
Elon Musk
After that the companies and partly the government as well tried to form regulations on AI. Not successfully until now though.
In March we experienced a banking crisis and banks started to collapse. The two most famous banks that collapsed at that time were Credit Suisse and Silicon Valley Bank. Credit Suisse had a lot of scandals, not just this year but in the past. On top of that, the share price plummeted. That led to the collapse of the bank because investors were worried about the future of the bank. It had $1.75 trillion in liquidity, making it the second largest bank failure in US history. Silicon Valley Bank collapsed before Credit Suisse, with $209 trillion in assets at the time of its failure. It was caused by selling its Treasury bond portfolio at a large loss.
However, the good news did not wait long after the series of failures. In May 2023, the technology company Nvidia reached a market value of more than $1 trillion. This makes it one of the six most valuable companies. The most valuable companies by market capitalisation (as of 27 December 2023) are Apple ($2.998 trillion), Microsoft ($2.777 trillion), Saudi Aramco ($2.139 trillion), Alphabet ($1.759 trillion), Amazon ($1.587 trillion) and NVIDIA ($1.219 trillion). NVIDIA’s immense growth has been driven by the ever-increasing demand for AI technology. As the company is one of the main providers of the technology, its growth simply reflects the demand.
Another very good development – the inflation cooled down in recent months. The Fed almost reached it’s target of 2%. At the end of November 2023 the inflation reached an all time low since 2021 in the US with 2.6%.
Finally, contrary to all predictions, the stock market did not experience a recession. The year 2022 led many economists to believe that 2023 would be much worse and that there could be a major recession – the opposite happened. Despite the rough start with the banking crisis and other developments, the market did not go into recession. As we leave 2023, the major indices such as the S&P 500 and the Dow are on their 9th consecutive winning week. The S&P 500 is up over 25% this year. The question now is what will happen next year. What will 2024 look like?
What is the outlook for the next year 2024
A forecast was given by the New York Times. They interviewed a former stock market strategist from J.P. Morgan. Mr. lee formally worked in the equity research before setting up his own forecasting firm. He predicted that the stock market will turn out fine in 2023 which was a big contrast to his peers on Wall Street. As it turns out, he was right. He is going into 2024 with optimism and says that he thinks the stock market will continue to rise as the Fed plans to cut interest rates in the following year. The same was said by prognosticators tracked by Bloomberg.
There are analysts, such as some at J.P. Morgan, who think the opposite. Some say that just because 2023 was good doesn’t mean 2024 will be good. It depends a lot on how the Fed cuts rates or not, and if there is something that makes investors nervous, the market will go into a recession. There are other indicators that 2024 may not be as good as 2023. The labour market has started to show signs of weakness in recent months. And the number of people who are late with their car payments is also rising. This does not prove that a crisis is around the corner, but it is a legitimate concern.
Though in history after the S&P 500 rose by more than 15% the next year it continued with a rise of more than 10% half the time. Even though it is not evidence because you cannot predict the market, it might be a good sign for some investors.
The stock market is booming and indexes are close to all-time highs. It will be interesting to see what happens to these prices and what 2024 will bring. Will we have a recession or will the stock market continue to rise? We are about to find out soon!
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