- Despite widespread predictions of a recession and bear market in 2023, US stocks ended the year near record highs with strong gains. The S&P 500 rose 19% and the Nasdaq jumped 33% for its best year since 2020.
- Forecasters were wrong that interest rate hikes by the Fed, a banking crisis, and Middle East war would lead to an economic downturn. The US likely saw slight growth in 2023 instead.
- Individual stocks like Tesla and Amazon rallied as well, shrugging off issues like production problems and losses. Overall, the market overcame challenges showing how hard it is to predict performance.
Almost no one thought 2023 would be a blockbuster year for stocks. They could hardly have been more wrong. The Federal Reserve raised interest rates at the fastest clip since the 1980s, a regional banking crisis felled Silicon Valley Bank, and war broke out in the Middle East. Yet stocks kept climbing.
U.S. stocks are ending a topsy-turvy year near records, defying bearish predictions. The S&P 500 is up about 19% for the year and on track for its best annual performance since 2019. The tech-heavy Nasdaq Composite has gained 33% in 2023, its biggest yearly gain since 2020.
Reasons for the Rally
The rally confounded forecasters on Wall Street and beyond. Headline after headline this year warned investors of economic calamity. “We will have a recession this year,” JPMorgan Chase & Co. Chief Executive Jamie Dimon predicted in May. Goldman Sachs Group Inc. analysts said in August there was a 35% chance of a recession within a year. Almost 90% of chief financial officers surveyed by Duke University forecasters in December thought a recession would hit in 2023.
It didn’t happen. The U.S. likely eked out slight economic growth for 2023 as a whole, economists estimate.
Impact on Individual Stocks
The upbeat market also defied Wall Street prognostications for individual stocks. Tesla Inc. has jumped 65% this year, double the S&P 500’s gain, shrugging off production problems in China and Chief Executive Elon Musk’s turbulent takeover of Twitter Inc. Amazon.com Inc. has climbed 27% even after posting its first yearly loss since 2014.
In the end, stocks overcame nearly everything thrown at them in 2023, from inflation to war. The old adage held true once again: Predictions are hard, especially about the future.