While loans growth did weaken steadily through the year, and year-on-year broad money supply growth turned negative, the US economy remained resilient (see Charts 1 and 2). Gross domestic product (GDP) growth surprised on the upside, driven by strong consumer spending, which was in turn underpinned by a robust job market, wage gains and leftover pandemic excess savings. We thought the housing market would slow and demand as well as prices would drop. It did not. At the same time, inflation cooled as supply chain disruptions healed. We also did not see how significant digital/artificial intelligence was going to be, in driving the performance of the “Magnificent 7”.
Let us start by wishing our readers a Happy New Year 2024. As it is almost “prerequisite” that all analysts offer their stock market predictions for the year ahead, we too will follow tradition. While we are drawn into assessing the market at the beginning of each year and outlook for the next 12 months, we also recognise that there is nothing magical or indeed even a reason why the performance of the stock market should be perceived, analysed or discussed within this timeframe, except that it is by convention, and it helps people’s frame of reference.
Looking back to this time last year, most analysts were predicting recession in the US. We too got the economy and market wrong. We were too cautious, too negative. We thought the economy would shrink faster with the US Federal Reserve’s aggressive interest rate hikes and, as a result, corporate earnings and asset values would fall. However, to a large extent, the expected negative impact from higher interest rates did not materialise.
