Despite a rather calm last session, on Friday, the main stock markets of the world completed the final stretch of the year 2023 with rebounds in value which, after a bearish episode in mid-year, brought them back very close to their previous peaks .
In the United States, the S&P 500 index, the most representative of the American stock market, ended the year a few points from its peak of 4,796 points established in January 2022. Over the entire year 2023, the S&P 500 shows an increase of 24% after a recovery of astonishing strength over the past two months.
In Canada, the S&P/TSX index of the Toronto Stock Exchange closed its last session of 2023 with a minimal gain of 0.1% at 20,989 points.
Over the entire year 2023, the flagship index of the Canadian Stock Exchange increased by 11%, but it still remains below its record of 22,000 points established in March 2022.
In Europe, stock indices increased slightly on Friday to further enhance their 2023 results.
Over the year, the main pan-European indices Euro Stoxx 50 (up 19%) and Stoxx 600 (up 12%) both recorded their third performance in 10 years.
In London, the FTSE 100 index remained behind, only registering an increase of 3.7% over the year 2023.
In Asia, the Nikkei index of the Tokyo Stock Exchange experienced a rebound of 28% in 2023, its best annual performance in ten years.
On the other hand, in Hong Kong, the Hang Seng index suffered a fourth year of decline, at minus 13%, as investors continued to shun China.
“The stock market performed rather well at the end of the year despite high economic and geopolitical uncertainty,” summarized Brendan Caldwell, president and CEO of the Toronto firm Caldwell Investment Management, in an interview with the D channel. BNN Bloomberg stock market information.
“On the one hand, better-than-expected corporate profits supported positive market dynamics. On the other hand, investor optimism was supported by the growing perception that the US Federal Reserve (Fed) has been able to tamp down inflation, but without causing a full-blown recession. Which could open the door to a reduction in interest rates during the first months of 2024.”
More vulnerable?
On this momentum, what is the outlook for the start of 2024? In the view of investment fund managers at the Royal Bank, stock markets have risen so quickly over the past two months that they would be very vulnerable to a downturn if the American economy were to slip into even a mild recession.
The likelihood of such an economic slowdown is still around 70% despite increasingly frequent predictions of a “soft landing,” warns RBC Global Asset Management chief economist Eric Lascelles in the recent investment prospects of this subsidiary of the Royal Bank.
Predictions of a soft landing are based on data showing inflation is slowing, suggesting that the US Federal Reserve and other central banks will soon be able to lower interest rates.
However, underlines Eric Lascelles, even if rate reductions were to take place in 2024, the global economy has not yet fully absorbed the impact of nearly two years of monetary policy tightening. Historically, the average time between the first rate hike in the United States and the start of the recession is about 27 months.
“The risk of recession has decreased slightly, of course, but the strong surge in stock market values rather suggests that this risk of recession has decreased remarkably,” underlined Eric Lascelles in an interview with the financial information agency Bloomberg.
« The S&P 500 index [de la Bourse américaine] ends the year up about 25%, after a staggering 14% rise since the beginning of November. This increase is mainly based on expectations of a considerable increase in future corporate profits, which is only really achievable in an ideal scenario of a soft landing for the economy. »
With Agence France-Presse, La Presse Canadienne and BNN Bloomberg