The S&P 500, representing the broadest measure of the US stock market, opened 0.1% higher at the beginning of the day. If it maintains these gains, it could achieve its first record high in two years. Closing the year with a remarkable 25% increase, the S&P 500 is on course for its ninth consecutive weekly gain, marking the longest streak since January 2004. This performance stands in stark contrast to the previous year when the benchmark index experienced a 20% decline in 2022.
The Dow Jones Industrial Average achieved multiple record highs in December, setting records in each of the last five trading sessions. Although it opened 0.3% lower on Friday, it quickly shifted into positive territory and is poised to hit its sixth consecutive record. In 2023, the Dow has recorded a 14% increase.
The Nasdaq Composite emerged as the star performer this year, with a remarkable 45% rise, marking its best performance since the recovery from the dot-com bust in 2003. Opening 0.1% higher on Friday, the Nasdaq is not in close proximity to a record. It remains approximately 1,000 points below its all-time high reached in November 2021, underscoring the challenges faced by the tech sector in 2022 and the potential for recovery.
The surge in stock prices was fueled by the resilience of the US economy amid Federal Reserve interest rate interventions. CNN Business’ Fear and Greed Index concluded the year in “Extreme Greed” territory.
In comparison to 2022, where inflation was running at about 6.5%, the current inflation rate has more than halved, standing at 3.1%. The Federal Reserve has hinted at an impending shift toward rate cuts. Despite concerns about a potential recession and the Fed’s higher-for-longer interest rate policy, US consumers continue to spend, and economic data remains robust. Unemployment stands at a healthy 3.7%.
However, 2023 was not without challenges. Investors faced a “wall of worry” throughout the year, navigating recession risks and the Fed’s interest rate policies. China’s struggling economy added to the uncertainties. Geopolitical tensions, including conflicts in the Middle East and Eastern Europe, as well as rising tensions with China, created apprehension on Wall Street. Even in a generally favorable market, there were still sectors experiencing losses.
