Global stock markets ended year on a high but uncertainty looms
Major global stock markets had mixed results on the last trading day of 2023, with Wall Street posting its best annual rise since 2019 as it entered the new year against the backdrop of economic and political uncertainty.
The S&P 500, Dow Jones Industrial Average and Nasdaq Composite all fell at the close of trading on Friday but defied expectations for the year after having recorded strong gains despite the shadows of high interest rates and recession fears.
The indexes were down 0.3 per cent, 0.1 per cent and 0.6 per cent, respectively, but were still big winners over the course of 2023. The benchmark S&P 500 settled more than 24 per cent higher this year, thanks to a stellar run in large-cap technology stocks. It was also slightly short of its record-closing high on January 3, 2022.
The “Magnificent Seven” stocks – comprising the biggest technology companies – all had remarkable runs last year.
Chip maker Nvidia, among those at the forefront of the generative artificial intelligence derby, rose by 239 per cent as it ramped up the development and manufacture of processors.
Facebook parent Meta Platforms, another big generative AI player, and electric car maker Tesla grew at 194.1 per cent and 101.7 per cent, respectively.
Amazon, the world’s biggest e-commerce company, surged by about 81 per cent while Google parent Alphabet was up 58.3 per cent. Microsoft and Apple jumped 56.8 per cent and 48.2 per cent, respectively. All four are involved in generative AI.
The Dow Jones index rose by 13.7 per cent while the technology-heavy Nasdaq surged by 43.4 per cent last year.
“The million-dollar question is what will happen [in 2024],” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
“Of course, we don’t know, nobody knows, and our crystal balls completely missed the AI rally that marked 2023, yet the general expectation is a cool down in the technology rally.”
Meanwhile, inflation remains high and has been the focal point of the US Federal Reserve’s interest rate increases.
Markets cheered on December 13 when the Fed signalled it could cut rates several times this year but chairman Jerome Powell later sought to temper that optimism with a more cautious tone after suggesting rates had reached their peak.
Investors now expect the Fed to begin slashing interest rates in March, CME FedWatch said.
“The US stock market could continue to see gains, with investors showing a positive sentiment overall,” said George Pavel, general manager at Capex.com Middle East. “The more dovish stance of the Federal Reserve could also support a stronger performance and a more risk-on sentiment.”
Markets are also concerned about the potential implications of the political drama in the US, particularly between President Joe Biden and his predecessor Donald Trump ahead of this year’s elections.
In Europe, London’s FTSE 100 inched up 0.1 per cent at close on Friday and gained less than 4 per cent over 2023 amid worries that interest rates could remain high due to inflation.
Frankfurt’s Dax and the CAC 40 index in Paris settled marginally up, having posted annual rises of 20.3 per cent and 16.5 per cent, respectively. Both recently recorded new highs.
In Asia, Tokyo’s Nikkei 225 settled 0.2 per cent down but still recorded a 28 per cent surge over the past year, its best showing in a decade.
Hong Kong’s Hang Seng index was flat while the Shanghai Composite rose by 0.7 per cent. The two were down 14 per cent and 3.7 per cent, respectively, for the year.