The Other Shoe Never Dropped: 2023 In Review

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The stock market is riding big gains as Wall Street enters the final week of 2023. If there’s any way to explain the year, it might be that the “other shoe never dropped.”

After all, 2023 began on a grim note as investors worried higher interest rates would cause a recession. Those fears were partially realized in March as lenders like Silicon Valley Bank failed. But growth in Artificial Intelligence (AI) more than offset the negativity. The market also benefited from deeper strengths in consumer spending and employment. Even a worrisome debt-ceiling crunch was averted in Washington.

Perhaps most importantly, inflation slowed as bottlenecks from the coronavirus pandemic eased. Borrowing costs fell in response, triggering a dash for stocks in November and December. When it was all said and done, the S&P 500 climbed 23 percent between through Friday, December 30, and Friday, December 22. The Nasdaq 100 rallied 52 percent.

Here are some other noteworthy points looking back on 2023:

  • Nvidia (NVDA) reached $1 trillion of market capitalization, joining Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL) and Amazon.com (AMZN).
  • Technology stocks rose 53 percent through Friday. If that holds, it will be their biggest yearly gain since 1999.
  • Some noteworthy stocks were added to the S&P 500:
    • Uber Technologies (UBER)
    • Airbnb (ABNB)
    • Lululemon Athletica (LULU)
    • Blackstone (BX)
    • Palo Alto Networks (PANW)
  • Other companies that went public in recent years joined the Nasdaq-100:
    • DoorDash (DASH)
    • MongoDB (MDB)
  • Annual inflation, measured by the consumer price index (CPI), fell below the Fed’s target interest rate for the first time in eight years.
  • Investor sentiment had an historic bullish swing in November.
  • Cboe’s Volatility Index (VIX) returned to pre-pandemic levels.
  • Homebuilders broke out to record highs and financials held long-term support from 2007.
S&P 500, daily chart, showing key events in 2023.

Big Movers in 2023

Top Gainers in the S&P 500 This Year
Nvidia (NVDA)+234%AI demand drove the semiconductor company’s valuation above $1 trillion. Results beat estimates all 4 quarters in the year.
Meta Platforms (META)+194%The social media giant cut costs to boost profit and benefited from a recovery in ad spending.
Royal Caribbean (RCL)+159%Strong bookings, lower fuel costs and hopes of lower interest rates lifted the cruise-ship operator.
Builders FirstSource (BLDR)*+158%The housing supplier boosted profits with new products and aggressively repurchased stock.
Uber Technologies (UBER)*+150%The ride-sharing company beat estimates all 4 quarters and was added to the S&P 500.
Source: TradeStation Data. (YTD changes as of Dec. 22.)
*-added to index during the year

Top Decliners in the S&P 500 This Year
FMC (FMC)-50%The fertilizer company issued weak guidance several times as demand weakened. It also faced worries about its patents and competition.
Enphase Energy (ENPH)-49%The solar-energy stock crumbled as high interest rates hurt demand.
Moderna (MRNA)-47%The vaccine developer fell amid weakening demand for coronavirus inoculations.
Dollar General (DG)-46%Sales growth slowed sharply for the discount retailer, prompting multiple guidance cuts.
Pfizer (PFE)-45%Weaker demand for Covid treatments and difficulty developing weight-loss products weighed on the pharmaceutical giant.
Source: TradeStation Data (YTD changes as of Dec. 22.)

Sector Performance in 2023

Technology+54%
Communications+51%
Consumer Discretionary+39%
S&P 500+24%
Industrials+15%
Materials+10%
Financials+9.2%
Real Estate+7.6%
Health Care-0.6%
Energy-2.9%
Consumer Staples-4.5%
Utilities -11%
Source: TradeStation Data (YTD changes as of Dec. 22.)

Key Economic Events in December

Below are some key economic events from last month.

  • Job gains beat forecasts as unemployment falls: Non-farm payrolls increased by 199,000 jobs in November, beating forecasts for growth of 180,000. Unemployment unexpectedly fell to 3.7 percent and wages grew 0.1 percentage point more than expected. The report bolstered hopes the economy will avoid a recession and achieve a soft landing. (12/8)
  • Fed signals more rate cuts in 2024: The Federal Reserve suggested its target rate may fall 50 basis points more than previously indicated. Policymakers also acknowledged for the first time that inflation had “slowed” in a meeting that appeared more dovish than most investors expected. They also lowered their forecast for price increases in 2024. (12/13)
  • Homebuilding rebounds: Housing starts unexpectedly increased by 15 percent in November to their highest level in six months. The report suggested builders are responding to a shortage in homes and lower mortgage rates. (12/19)
  • Consumer confidence jumps as inflation eases: Consumer confidence rose more than forecast to its highest level since July. The survey reflected optimism about inflation, job availability and personal income. (12/20)

What Experts Are Saying

Below are some noteworthy commentaries.

  • Inflation is headed back to the Fed’s goal of 2 percent target, policymaker Austan Goolsbee said at an economic conference. He cited normalized supply chains and expected declines in housing costs. (12/1)
  • The S&P 500 could climb to 5400 in 2024 and 6000 in 2025, market strategist Ed Yardeni said. He expects AI to boost productivity and profits without the economy falling into recession. (12/11)
  • The Russell 2000 small cap index could appreciate 50 percent in 2024, Tom Lee of Fundstrat said in an interview of CNBC. He cited lower interest rates and greater risk appetite after the Fed meeting. (12/14)
  • The housing market is starting to thaw, according to National Association of Realtors President Tracy Kasper. “A pent-up buyer pool on the sidelines,” wants to purchase homes, she said in an interview on CNBC. However, there’s still a shortage of inventory. (12/14)
  • More than 40 percent of the S&P 500’s members hit an overbought condition in mid-December, according to Carson Strategist Ryan Detrick. Similar moments, like January 1975 and February 1991, were followed by average yearly gains of more than 25 percent, he said. (12/18)

Popular Futures Contracts

ProductCurrent
Month
ExpirationNext
Month
1-Mon%
S&P 500 E-Mini (@ES)ESH24 (Mar)3/15/23ESM24+3.7%
Nasdaq-100 E-Mini (@NQ)NQH24 (Mar)3/15/23NQM24+4.8%
Dow Jones E-Mini (@YM)YMH24 (Mar)3/15/23YMM24+3.7%
Russell 2000 E-Mini (@RTY)RTYH24 (Mar)3/15/23RTYM24+12.1%
Source: TradeStation Data (Monthly changes as of Dec. 22.)

Newsworthy Events Next Month

DateEventWhat to Watch For
Fri 1/5Employment reportJob-market conditions: unemployment, wages, hours worked.
Thu 1/11Consumer price index (CPI)Inflation trends
Fri 1/12Earnings season beginsMajor banks including JPMorgan Chase (JPM) start issuing fourth-quarter results.
Wed 1/17Retail salesWill sales beat estimates for a sixth straight month?
Wed 1/31Fed meeting, press conferenceInterest rates, comments on inflation

Security futures are not suitable for all investors. To obtain a copy of the security futures risk disclosure statement Investment and Trading Disclosures Booklet – Futures.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.