How does 2023 stack up against 2022?

DEWITT, Mich. - Dec. 28, 2023 - PRLog -- It was a quiet week for the markets in terms of headlines and new data, with markets oscillating day to day but finishing with a modest move for the week. It's been anything but a quiet year, however.

Strong rallies to start and finish 2023 bookended spring (regional bank crisis) and fall (rising interest rate concerns) sell-offs. We also saw a healthy summer rally, driven by evidence of a more-resilient-than-expected economy.

After a lousy 2022 for the markets, this year was a powerful reminder of the importance of a long-term, disciplined investment strategy, and the value of an opportunistic approach during bouts of market pessimism.

Winning streaks

• Stocks extended their winning streak last week, with the S&P 500 rising for eight consecutive weeks¹. In the past 50 years, there have been only three longer streaks, with the last occurring 20 years ago. While the duration is impressive, so too is the gain during this run¹. Of the five other winning streaks that lasted eight weeks, only the 1997 episode saw a stronger gain¹.

Annual equity returns

• 2023 ranks as the 12th best year for the S&P 500 since 1980. For the 11 that were better, the stock market gained an average of 8% in the subsequent year, indicating strong years often see a favorable encore¹.

Largest pullbacks

• The largest intra-year pullback has averaged 14% since 1980, yet during that 44-year stretch, the stock market finished higher for the year 77% of the time¹. This underscores how important it is to stay the course when the going gets tough.

Interest rates

• Interest rates have been a powerful influence on market performance over the past two years. We think 2023 brought an inflection point in the overall interest rate backdrop, with the October peak in yields proving to be the high-water mark for this cycle. In 2023, the yield curve — the difference between long-term and short-term interest rates — was the most inverted it's been in more than 40 years, with short-term rates higher than long-term rates. This was a result of the Fed's aggressive policy tightening aimed at quelling four-decade-high inflation¹.

Economic growth

• The consumer was the star of the economic show in 2023, driven by a historically strong labor market. In fact, the unemployment rate reached its lowest point (3.4%) going back to 1980. This matched the lowest unemployment since 1969. You have to go back to 1953 to find a lower jobless rate, when unemployment reached 2.5%.

Sources: 1. Bloomberg