But that bearish outlook was shattered as stocks rallied even as the Federal Reserve continued to ratchet up interest rates in the face of stubbornly elevated inflation. And what was supposed to be the Year of the Bond fizzled: US Treasuries have nearly wiped out their tiny gain for the year as yields test new highs and the economy remains surprisingly resilient in the face of the Fed’s monetary policy onslaught.
Up and down Wall Street, forecasters were caught flat-footed by how the first half of 2023 unfolded in financial markets. That seems to have rattled their faith in what the winning playbook for the rest of it should be.
Heading into the year, a handful of predictions dominated strategists’ annual outlooks. A global recession was imminent. Bonds would trounce stocks as equities re-tested bear-market lows. Central banks would soon be able to stop the aggressive rate hikes that made 2022 such a year of market misery. As growth stumbled, there’d be more pain for risky assets.
