After a difficult year in 2022, the markets rebounded in 2023. Frankfurt, Paris, and even Tokyo are operating at record levels.
(AFP/PHILIP FONG)
The experts were convinced that the recession would be the central character on the markets in 2023. Ultimately, it was seen almost nowhere, to the great relief of the stock market indices.
“If we look at our forecasts last year, we thought that the year 2023 would revolve around the recession in the United States. We were wrong,” admits Colin Graham, head of multi-asset strategy at Robecco.
In the third quarter, growth in the American economy, the largest in the world, amounted to more than 5% at an annualized rate.
In Europe, the trend is much less promising
, but over the first three quarters of 2023, growth in the countries of the European Union is 0.2%, that of the euro zone is 0.1%. The strength of the American economy is essentially due to the strength of consumers, who have until now ignored both inflation and the rise in interest rates, specifies Vincent Juvyns, analyst at JPMorgan AM.
As a result, after a difficult 2022, the stock markets have rebounded: the MSCI World global index posted a gain of 22% over the year, compared to nearly 20% losses last year. In Europe,
Frankfurt and Paris notably set a new absolute high
when Milan is at its highest since 2008 and Madrid since 2018. In Asia, Tokyo is operating at its highest levels in 30 years, while in the United States, the Dow Jones index reached a new high on Thursday at closing, the S&P 500 approaching its all-time high from January 2022.
“Magnificent Seven”
But, within stock market indices, the kings of 2023 are undoubtedly companies linked to artificial intelligence (AI). Leader in the semiconductor market used for the development of generative AI, the American Nvidia saw its value more than triple on the stock market, reaching $1,220 billion, the sixth largest company in the world in terms of capitalization stock market. With the American technological titans, Google, Amazon, Facebook, Apple, Microsoft and Tesla, Nvidia forms the group of the “Magnificent Seven”, mega-caps which represent a large part of the rise in the stock markets in 2023.
Only the stock markets in China struggled
-the MSCI China index losing more than 15%-, abandoned by investors due to an economic recovery less dynamic than expected, the fragilities of real estate and the absence of a massive recovery plan from the authorities.
But at the global level, growth, as well as the still very low unemployment figures, have not always been well received by market players, because it also implies more difficulties for central banks in their fight against inflation. With their decision on key interest rates or their interventions on the markets through repurchases or sales of assets,
central banks make rain and shine on the markets
: their decisions and debates are therefore constantly scrutinized. The American Federal Reserve even had to intervene in March 2023 to reassure the markets and prevent the bankruptcy of three regional banks in the United States from leading to panic throughout the global financial system.
Although the pace of price increases slowed over the year,
central bankers refused to relax their policy
, tightening it further in September, pushing back the prospect of a rate cut, so hoped for by investors. The conviction that rate cuts will take place in the first months of 2024 finally took shape in November, allowing global stock indices to experience their best month in three years, and leading to a drastic fall in borrowing rates on the markets .
“The fact that the market anticipates that central bank rates could fall without having gone through a phase of economic recession has had a direct impact” on the markets, explains Christopher Dembik, investment strategy advisor at Pictet AM . This movement also benefited small companies, hitherto neglected by investors, which widened a large valuation gap with multinationals during the year.