July 18, 2024

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5 lessons for investors from a wild year in markets

2 min read

Markets React To Fed Policy AnnouncementJohn Moore/Getty

  • Bank of America strategists broke down the five biggest lessons for investors and the economy from 2023.

  • The US economy navigated aggressive Fed rate hikes, China struggled, and bond vigilantes returned.

  • For investors, 2023 marked the end of “TINA” and introduced alternatives to equities.

Through 2023, surging interest rates have forced global markets and economies to adjust to the end of the easy money era.

Macroeconomic dynamics are front and center for investors as much as traditional market drivers like earnings growth and valuations. In a note this week, Bank of America strategists Joseph Quinlan and Lauren Sanfilippo broke down the five biggest lessons of the year as markets get ready to turn the calendar.

The first lesson? “Don’t bet against America,” the analysts wrote.

A year ago, most forecasters expected a recession in 2023 thanks to the Federal Reserve’s aggressive monetary policy tightening.

But instead of rolling over, the economy pushed forward, with strong consumer spending and a robust labor market powering growth.

“The US economy is still the greatest show on planet Earth,” the strategists said. They described the country as a $27 trillion “hydra-headed behemoth” that is the best at many different economic activities including agriculture, aerospace, energy, technology, and more.

The second takeaway, according to the bank, is that China needs a new growth model. The much-hyped post-pandemic rebound never arrived, and instead the world’s second largest economy has been saddled with an ailing property sector, aging demographics, and declining foreign investment — all of which point to a “Great Wall of Worry” ahead.

“A new growth model could center on the Chinese consumer, with personal consumption expenditures in China just 40% of GDP vs. roughly 70% in the US,” Quinlan and Sanfilippo said. “However, policies focused on driving consumption-led growth…have yet to materialize.”


2023-12-02 16:46:02

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