A Rollercoaster Ride: The Market's Unpredictable 2023
A year of remarkable market changes, from record-low mortgage rates in the US to a billionaire's surprising decision to pass on his wealth to his former gardener A transformative 2023 captured in a concise snapshot
This story initially appeared in CNN Business Before the Bell newsletter. Not a subscriber? You can sign up here. An audio version of the newsletter is also available by clicking the same link. We've reached the last Before the Bell of 2023 and what a difference these past 12 months have made.
During the initial week of trading in 2023, I penned: "We are currently in the promising early days of the New Year, a time when many people feel rejuvenated and driven, and maybe even hopeful about the upcoming year. There's a sense of clarity that accompanies this period in January."
However, the pressing issue on everyone's thoughts is whether the United States will face a recession in the coming year.
The outcome is that inflation has decreased, the Federal Reserve has suggested that a shift towards lowering interest rates is on the horizon, economic indicators are encouraging, and the job market continues to show resilience. At the same time, stock prices have reached all-time highs.
By 2022, the S&P 500 had dropped by 18% and inflation was at 6.5%. Fed Chair Jerome Powell issued a warning in his last meeting of the year, stating that the Federal Reserve would continue to increase interest rates until their goal was achieved.
Since then, inflation has decreased by more than half to 3.1% (as of November), and the Fed has maintained stable interest rates over its past three meetings. Policymakers anticipate three rate cuts next year, and stocks have reacted positively— the S&P 500 has increased by 23% in 2023. However, it hasn't been entirely without challenges.
Looking back at some of the events that caused stocks to surge and plummet this year, we find that on January 19, the US reached its $31.4 trillion debt ceiling mandated by Congress. This led the Treasury Department to implement extraordinary measures to ensure the government could meet its financial obligations. As a result, markets initially dropped but rebounded swiftly.
In early March, Silicon Valley Bank and Signature Bank collapsed after a dramatic 48 hours filled with bank runs and a capital crisis, marking the second- and third-largest failures of a financial institution in US history. This led to US banks posting their worst performance since 2020 and sparked a regional banking crisis. In a major banking rescue, UBS purchased Credit Suisse, marking the biggest acquisition since 2008. On May 1, JPMorgan acquired First Republic bank, further adding to the list of major bank failures in US history.
May 25: Nvidia's impressive earnings report causes its stock to surge, sparking excitement about AI and positioning the company for a strong market performance this year.
Early June: Congress manages to suspend the nation's debt limit until January 1, 2025, preventing a first-ever US default just before the deadline. The markets show minimal reaction.
On June 8th, the S&P 500 surged by 20% since its recent low on October 12, 2022, officially signaling the end of the bear market that started in January 2022.
On June 14th, the Federal Reserve halted its aggressive rate-hiking efforts to combat inflation after raising rates 10 consecutive times, leading to a significant market rally.
On August 2, Fitch Ratings lowered its US debt rating from AAA to AA+, citing a decline in governance standards. This news led to a sell-off in the US markets, with the Nasdaq experiencing its worst day in five months.
On September 14, UK-based chip designer Arm ended a nearly two-year IPO drought with a successful debut on the Nasdaq, marking the largest IPO of the year. Arm closed the day 25% higher.
October 7: Hamas launches an attack on Israel, sparking an ongoing conflict.
October 19: The yield on the US 10-year Treasury note reaches 5% for the first time since 2007, driven by robust economic growth and increased inflation.
On December 13, the Federal Reserve kept interest rates steady for the third consecutive meeting and projected three rate cuts for the upcoming year. This news led to a market rally.
Then, on December 20, the Dow achieved its fifth consecutive record high, while the S&P 500 came close to surpassing its January 2022 record by just a few points.
Thank you so much for joining Before the Bell through all of this.
Well be back again in January to do it again next year. See you then.
Mortgage rates in America dropped to their lowest level since June
The downward trend in US mortgage rates persisted this week, providing a glimmer of hope for potential homebuyers grappling with the most challenging housing market affordability since the 1980s, according to my colleague Anna Bahney's report.
Last week, the rates fell below 7% for the first time since mid-August. This trend continued this week, with the 30-year fixed-rate mortgage rate dropping to an average of 6.67% in the week ending December 21. This is down from 6.95% the previous week, according to data from Freddie Mac released on Thursday. A year ago, the average 30-year fixed-rate was 6.27%. This marks the eighth consecutive week of declines, which is attributed to the anticipation of Federal Reserve rate cuts beginning next year.
Hermès billionaire wants to bequeath fortune to his former gardener
An heir of Europe's wealthiest family has allegedly initiated the procedure to officially adopt his former middle-aged gardener, with intentions to leave him a significant portion of his estimated â¬12 billion ($13 billion) wealth, as reported by my colleague Hanna Ziady.
Nicolas Puech, 80, the fifth-generation descendant of Hermès founder, is seeking to revoke a contract that would leave his wealth to the Isocrates Foundation, which he established, and designate his employee as a rightful heir.
The foundation is challenging Puech's decision to sever the arrangement, which it claims to have just become aware of. In a statement provided to CNN on Wednesday, the charitable organization stated, "Legally, the unilateral revocation of the inheritance contract appears null and baseless."
"The foundation has therefore opposed the cancellation of the contract, while leaving the door open for discussions with its founder."
