This Week in Financial Markets: 12.31.2023

1. Final S&P 500 Heat Map of 2023

What a year! After a rough 2022, especially for tech stocks, the market ripped back to the highs in 2023 namely led by… tech stocks! This was namely driven by the mega-cap weighted names which have a larger weighting in the index. Market breadth (number of advancing equities relative to number of declining equities) was pretty weak for most of the year, but big-tech companies carried the weight of indexes when the rest of the equity world was unfavorable. Looking out to 2024 however, indexes are now more top-weighted than ever, big-tech will be even more important moving forward.

2. Economists Relatively Optimistic

At the end of 2022, 85% of economists were predicting a recession in the year ahead. This year, the number is fewer than 1/3. Roughly 70% of economists see an 'economic landing’ with a small subset of that group seeing a re-acceleration in economic activity. One thing is for sure - in an election year the current Administration will do all they can to avoid a recession.

Global manufacturing is clearly struggling. Demand out of China is weak, German factories have been in trouble for years, and the US manufacturing base has been weak for months. Yet somehow, the global economy isn’t tipping over. This shows the trend which has occurred in the USA over the last few decades of increasing economic importance from services and the consumer is becoming a global trend. As long as consumers can consume, cyclical manufacturing is no longer creating volatile short-term economic cycles.