Stocks end 2023 with a big surge
Against a backdrop of relentless economic angst, stocks soared in 2023.
Why it matters: The gains mean that everyone with a market-representative portfolio is quite a bit richer than they were at the beginning of the year.
- On paper, the value of all the stocks in the S&P 500 — the vast majority of U.S. stock market wealth — rose by roughly $8 trillion in 2023
State of play: The S&P 500 rose 24.2% for the year.
- The tech-heavy Nasdaq composite index did even better — it surged 43.4%.
- The Russell 2000 — an index of small cap stocks that tends to mirror sentiment about the U.S. domestic economy — rose 15.1%.
Flashback: A year ago, no one on Wall Street was predicting that kind of ride.
- Inflation was still at a pace above 6%. The Fed was hiking interest rates hard with no sign of stopping. Almost everyone expected a recession.
- Oh, and there was the not-insignificant risk that the U.S. would default on its debt — thanks to the political standoff over raising the debt ceiling — potentially setting off a financial crisis.
Yes, but: Remarkably, the economy made it through 2023 not only unscathed but with fast growth and low unemployment, even as the rate of inflation has tumbled quickly.
- At this point at least, it seems like the best-case scenario, a soft landing for the economy, is a reality.
What to watch: Whether, going into a presidential election, the new heights of the stock market can shift the sour sentiment that has characterized the U.S. mood since the pandemic hit.
- Historically speaking, a high stock market is considered a key to a happy U.S. consumer. We'll see if that holds.
Go deeper: Everyone loves stocks again