- The S&P 500, the Dow, and the Nasdaq recorded nine consecutive weeks of gains.
- Lower interest rates led to a year-end rally for equities.
- European equities gained almost 13% annually in 2023.
US equities ended Friday slightly lower, closing a solid year-end rally as investors anticipated Fed rate cuts in the year ahead.
S&P 500 weekly performance (Source: Bloomberg)
Equities have risen strongly in the last months of the year. The S&P 500, the Dow, and the Nasdaq recorded nine consecutive weeks of gains. For the S&P 500, this is the longest weekly winning run since January 2004. Meanwhile, it is the longest since 2019 for the Dow and the Nasdaq. Major events in the year included the US banking crisis in March and an AI stocks rally. Moreover, there were oil supply worries due to the Israel-Hamas war and fears of a recession in the US due to the Fed’s restrictive policy.
Still, lower interest rates were the major catalyst for the year-end rally, which strengthened in December. The Fed changed its hawkish stance, opening the door to rate cuts in 2024. Meanwhile, European equities ended 2023, gaining almost 13% annually due to hopes that central banks will ease monetary policy in 2024.
The pan-European STOXX 600 rose 0.1% on Friday, its seventh straight weekly gain and the best December performance since 2021. Global markets have benefited in the last two months as bond yields fell due to hopes of rate cuts in early 2024.
Despite expectations, the European Central Bank has not yet indicated potential easing, although money markets suggest an 80% chance of a first cut in March. The European share benchmark recovered over 12% from lows in March, triggered by the swift collapse of Swiss lender Credit Suisse and US mid-sized lender Silicon Valley Bank.
On Friday, the UK’s FTSE 100 edged up 0.1%, concluding the year 3.8% higher but lagging behind most of its European peers. Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, remarked, “Britain’s blue-chip index still appears unloved, with attention grabbed by the bright lights of Wall Street and the tech-heavy makeup of New York’s exchanges. There is a frenzy for all things AI fueling buying behavior.”
Elsewhere, according to mortgage lender Nationwide, British house prices fell by 1.8% in the 12 months leading up to December. It marked the most substantial decline over the course of a year since 2008, during the global financial crisis.
