2023 Performance of Major Stock Indices
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The year 2023 has been a remarkable one for global stock markets, with many major indices posting strong gains.
The MOEX Index of Russia led the way with a return of 41.4% year-to-date (YTD) as of December 14, 2023. The Nikkei 225 Index of Japan was close behind with a YTD return of 26.2%.
Other notable performers included the S&P 500 Index of the United States (20.9%), the DAX Index of Germany (20.6%), and the CAC 40 Index of France (16.5%).
The Nifty 50 Index of India and the KOSPI Index of South Korea also posted solid gains, with YTD returns of 15.0% and 12.3%, respectively.
The FTSE 100 Index of the United Kingdom was the only major index to underperform in 2023, with a YTD return of just 1.2%.
The Shanghai Stock Exchange Composite Index of China and the Hang Seng Index of Hong Kong also posted negative returns for the year, with YTD declines of 4.2% and 18.0%, respectively.
While I am not a certified financial analyst, a Business Insider article attempted to shed some light on the possible explanations for the good stock market performance. Here are the key factors:
Big Tech earnings:
- Tech stocks have been the main drivers of the market this year, especially the "Magnificent Seven" tech companies.
- In January, Netflix's earnings report boosted the Nasdaq index by 2.7%.
- In April, Meta's quarterly results pushed its stock price up 14%.
- In May, Apple's earnings report led to a 4.7% gain in its stock price.
- The "Magnificent Seven" tech companies accounted for 34% of the S&P 500 index in September.
Interest rates:
- Rising bond yields weighed on markets in 2022 and early 2023, but hints that they could be headed back down have given stocks a boost.
- On March 3, stocks rallied when the 10-year Treasury yield ticked downward after touching 4%.
Fed policy:
- The Fed's decision to pause on rate hikes has also led to a rally in stocks.
- Very recently the S&P 500 jumped 1.9% after the Fed announced its decision to pause on rates.
Fears of a recession:
- The market has reacted strongly to news that could indicate a slowdown in the economy.
- The biggest market jump in 2023 followed the December jobs report that showed slower-than-expected wage inflation.
- In March, stocks rebounded on news that deposits at Silicon Valley Bank and Signature Bank were guaranteed.
While these are some factors, I am sure there are many more explanations. Nevertheless, if your investments in 2023 ended in the green, then congratulations; and if they did not, then you get another shot in 2024.