No doubt many of you will be doing the year-end countdown this weekend, perhaps with bubbly in hand. Market-wise, while we still have today’s results, so far YTD23 has driven asset classes higher. US equities trounced international counterparts, with the S&P up +27%, versus global equities generally via the ACWX at +16%. Although it was supposedly going to be the year of the bonds, that didn’t happen until later in the year. Still, credit had a decent showing. US bonds via the TLT were up +4%, global bonds via the BWX up +4%, US credit via the LQD +10%, and global credit via the IBND +11%. While not exactly as strong as equities, cash was a major story this year. The BIL was +5%, the US dollar via the UUP +3%, and developed market currencies via the UDN were up +5%, versus EM via the CEW +9%. The big winner was crypto, with BITO up +141%. Thanks to 42Macro for summarizing the math on these.
Since everyone likes a good year-end look-back, some of the biggest stories this year included:
(i) no recession, given resiliency in the economy and labor here in the US
(ii) the dreaded banking crisis of 1-2Q23, followed by deal-making (goodbye First Republic, CS, and SVB) and the rapid stimulus-fueled recovery post-crisis
(iii) China sucking wind alongside disappearing generals, social media folks, and corporate leaders
(iv) the ongoing Russia/Ukraine war
(v) Japan’s inflation and talk of yield curve control ending
(vi) AI everywhere, and in every mgmt. commentary
(vii) the Hamas/Israel conflict
(viii) the Fed pause/eye to pivot with a performance-chasing Turkey time rally
(ix) whatever happens from now until the ball drops
The BIS’ effective exchange rate calcs point to the yen and the Swedish krona being the most undervalued. We’re long one of those trades, so hopefully with the USD pressure, we’ll see those valuation gaps narrow.
Google is going to settle a lawsuit (supposedly) that claimed it secretly tracked people who thought they were browsing incognito. Price tag for peeping? $5bn.
You’ve probably read that Boeing told airlines to check 737 Max planes for a “possible loose bolt” in the key rudder control system. So, you should probably check your ticket info to see what plane you’re flying….
Well, we did it. We hit the highest level so far. The Overnight Financing Rate hit 5.4%, the highest fixing since the benchmark started in Apr 2018. Still watching this…
A pop in demand for crypto futures and options, even from traditional institutions, is happening—it’s a bet before the deadline for US regulators to approve or reject ETFs that invest directly in bitcoin—per The Block below.
