Commentary: 2023 Summary
2023 has been a contrasting year to 2022. Inflation in DMs has retreated considerably since the start of the year (from 6.4% to 3.1% in the US and from 8.6% to 2.4% in Eurozone). Meanwhile, economic activity has been more resilient than expected. The first three quarter GDP growth averaged 3.1% in the US, while Europe got away without a recession. According to the latest forecast for 2024, IMF expects a 1.5% growth for the US GDP, 1.2% for Eurozone, and 2.9% for the global economy. Meanwhile, the gap between the actual and target inflation is expected to fall further.
Capital markets responded very positively to the improved macroeconomic climate as investor interest in risky assets came back. While S&P 500 returned 24% YTD, the tech-heavy Nasdaq 100 gained a strong 53%, partly attributed to the increased optimism around AI technologies.
On the other hand, in 2023, global fixed income markets saw yields reach multi-year highs. Despite last month’s drop in yields, major rates are still very attractive, with 1-year, 2-year, and 10-year US Treasury yields standing at 4.85%, 4.33%, and 3.90%, respectively.
