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It’s time to overview my checklist of predictions from 2023 to see what I acquired proper and what I acquired mistaken. Right here’s what I wrote a yr in the past:
Market predictions are foolish. All of us discovered this a very long time in the past. However that doesn’t imply they’re utterly nugatory. Although forecasts are nearly at all times mistaken, they are often entertaining and academic. That’s all I’m attempting to do with this submit. Entertain and educate. Evidently, however I’ve to say it anyway, nothing on this checklist is funding recommendation. I’m not doing something with my portfolio based mostly on these predictions, and neither do you have to.
Right here is my checklist from a yr in the past. I acquired some proper and rather a lot mistaken, which is hardly a shock. I anticipate my predictions to have a horrible observe document, and that’s why I attempt to journey the market fairly than outsmart it. So why am I doing this? Nicely, it’s enjoyable to look again on what you thought was potential a yr in the past. If you see that you just have been so off on some issues, it reminds you simply how tough it’s to foretell the longer term. I additionally study rather a lot by doing this. I uncovered some issues that I didn’t know or forgot I knew. So with that, these are my ten predictions for 2023.
- Bonds maintain their very own as a diversifying asset ✅X
- Tech continues its layoffs ✅
- Jeff Bezos returns to Amazon X
- The IPO market stays frozen ✅
- Worth Outperforms Development Once more X
- Gold makes a brand new all-time excessive X
- The Housing Market Doesn’t Crash ✅
- Worldwide Shares Outperform X
- Bitcoin beneficial properties 100% ✅
- Power shares proceed to outperform X
- Bonus. The market avoids a recession, and shares achieve double digits. ✅
My checklist had 5 wins, 5 losses, and one tie. Let’s overview.
- Bonds maintain their very own as a diversifying asset ✅X
2022 was a tough yr. Threat belongings acquired smoked in 2022 because the fed aggressively got here off zero and jacked charges up by 425 foundation factors. Fastened revenue had a front-row seat to the horror present. Zero-coupon bonds fell like a meme inventory, with a 48% peak-to-trough decline throughout the calendar yr. Even intermediate-term bonds acquired hammered, falling 10% on the yr.
The rationale why my name is inconclusive is that bonds acquired a blended grade in 2023 relying on the way you have been positioned. Extremely-short bonds, suppose money, returned ~5%% this yr. It’s been over 15 years since buyers have been capable of earn this a lot by doing so little. However when you have been so courageous to tackle rate of interest threat, elements of 2023 appeared like a repeat of 2022. Lengthy bonds acquired killed because the higher-for-longer concept permeated Wall Road within the fall of 2023.
However when you went towards the grain and pale that decision, you made a fortune. Lengthy bonds are up greater than 30% since rates of interest topped.
The underside line is that it’s been a blended yr for bond buyers relying on how a lot rate of interest and credit score threat you took, and while you took it. Talking of, high-yield bonds are up 13% on the yr which is wild contemplating how afraid all of us have been of the financial ramifications of an aggressive tightening cycle. ¯_(ツ)_/¯
- Tech continues its layoffs ✅
The unhealthy information is I acquired this proper. The excellent news is that this peaked in January and has been coming down ever since. 583 corporations laid off 167,409 staff within the first quarter. Within the fourth quarter, these numbers fell to 183 corporations and 20,376 staff let go.
Just about each huge title in tech laid off staff over the past couple of years: Google, Meta, Microsoft, Amazon, Salesforce, Dell, Micron, Cisco, Twitter, Uber, IBM, Reserving.com, Peloton, VMware, Groupon, Certainly, Zillow, Shopify, PayPal, Airbnb, Instacart, Wayfair, Yahoo, Spotify, Carvana, Zoom, Sew Repair, Snap, and Qualcomm.
The market, chilly as it’s, rewarded many of those corporations as they shifted from progress in any respect prices to getting lean and specializing in the underside line.
- Jeff Bezos returns to Amazon X
Out of all of the gadgets on my checklist, this one was the goofiest. Don’t get me mistaken, I completely would have began a technology-focused substack if this truly occurred, nevertheless it was a hail mary.
One of many causes I like doing these lists is that it’s really easy to overlook the place we got here from as recency bias dominates our cognitive features. All yr we’ve centered on the latest returns of the Magnificent 7 (Amazon is up 83%). How shortly we overlook that Amazon fell 50% in 2022 and shed $840 billion in market cap! Amazon, regardless of its dominance, has barely outperformed the S&P 500 over the previous 5 years. Out of all the big tech shares, it’s by far the worst performer.
From every little thing we see on the web, Jeff Bezos appears like he’s dwelling his greatest life. It doesn’t appear like he’ll be pulling a Bob Iger any time quickly.
- The IPO market stays frozen ✅
On the spectrum of threat belongings, new publicly traded corporations are about as dangerous because it will get. And in a yr the place threat is shunned, the demand for these dangerous belongings collapses. Such was the story of 2022.
This chart from EY exhibits the worldwide variety of IPOs and their proceeds in 2023 versus the 5-year common. In america, IPO exercise was down 36% whereas proceeds collapsed by 66%.
The market did carry a couple of huge names public this yr, with blended outcomes. ARM holdings is up $42 from the place the bankers priced the providing, whereas Instacart is 21% under.
This one was probably the most consensus prediction on my checklist. It was not a daring name to suppose that this yr could be a continuation of final yr when it comes to the demand for brand spanking new points.
Whereas the market remains to be effectively under the place it was a couple of years in the past, there are causes to be much less discouraged. The IPO ETF is up 53% on the yr after experiencing a 57% free-fall in 2022.
- Worth Outperforms Development Once more X
This was hilariously mistaken. I’ll admit, I might have guess some huge cash towards the Nasdaq-100 being up 50% in 2023. Not that I wanted it, however this specific prediction was a very good reminder that guessing the longer term is a idiot’s errand. In 2022, worth killed progress. The precise reverse occurred in 2023.
The hole between small progress (17%) and small worth (12%) truly wasn’t as giant as I believed, particularly contemplating financials are such a big slice of the index. Talking of which, I used to be stunned to study that KRE is just down 10% on the yr after being down as a lot as 39% in could.
The efficiency unfold between giant progress (41%) and huge worth (8%) is wider in 2023 than any yr throughout the dotcom bubble and trails solely 2020 in its magnitude.
- Gold makes a brand new all-time excessive ✅
Shut however no cigar on this one. Gold had a stable yr, gaining 12%, however its nonetheless 2% under its 2020 excessive.
- The Housing Market Doesn’t Crash ✅
That is within the candidate for chart of the yr. Housing exercise may need crashed as housing affordability hits multi-decade lows, however home costs hit all-time highs. Simply an unimaginable flip of occasions.
- Worldwide Shares Outperform X
U.S. shares, as soon as once more, have been the place to be in 2023. Though worldwide developed shares didn’t sustain, they’re up 17% (in USD) on the yr. The German, French, and U.Okay. inventory markets are every near all-time highs. Not unhealthy contemplating how pessimistic buyers have been on Europe coming into 2023. 
Out of all of the predictions I made a yr in the past, this one appeared the least probably. Right here’s what I wrote on the time:
“It’s arduous to make the bull case for an asset class that feels prefer it comes with profession threat. With all of the negativity surrounding the area proper now, I’m amazed that Bitcoin isn’t under 10k proper now. And possibly that’s what the bulls can grasp their hat/hopes on.”
We have been only a month faraway from the revelation that FTX was a big fraud, and it genuinely appeared like there was nothing left to be optimistic about. Crypto has emerged as a professional asset class, which can be cemented by the ETF. However skeptics nonetheless wish to level out that it doesn’t do something. I get what they’re saying, within the sense that most individuals have by no means used Bitcoin and don’t have any use for it. Whereas true, I feel it dismisses a easy but highly effective truth. What does Bitcoin do? It really works. The community doesn’t go down. Transactions undergo. It does precisely what it’s purported to do. It would by no means exchange Venmo, however that doesn’t imply it’s nugatory. It’s a deeply liquid market that’s presently altering arms at ~$43,000. That’s what it’s price at present.
- Power shares proceed to outperform X
This wasn’t simply mistaken, it was very mistaken. Power was the third worst-performing sector behind utilities and client staples. 
Chalk one as much as recency bias on this one. Power shares have been the top-performing sector in ’21 and ’22. However they have been additionally extremely worthwhile and fairly valued. I believed this momentum might carry over into 2023. I used to be mistaken.
- Bonus. The market avoids a recession, and shares achieve double digits. ✅
Out of all of the predictions I made, this was the one I used to be most nervous about. Had we gotten a recession and presumably a bear market in 2023, it will have been the one that everybody, and I imply everybody, noticed coming. Predicting a powerful yr when it was “apparent” we’d have a nasty yr took chutzpah. 2023 ought to function a lifelong reminder of why stuff like this, predictions and whatnot, are totally nonsensical and must be saved far, far-off out of your portfolio. That mentioned, I’m placing the ending touches on my 2024 checklist which can be out later this week 😊
I hope everyone had an exquisite yr, and wishing everybody well being and happiness in 2024. And if our portfolios go up, that’s simply the cherry on high.
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