5 Things That Surprised Economists, Analysts and Financiers Around the World in 2023.
#2: The Chinese economy.
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The year 2024 has just begun, and it promises to be full of surprises. Like every year, I dare say. Because everyone needs to realize that, in life, nothing is certain. This applies to the economy and macroeconomics.
In what follows, I'd like to take a look back at 5 things that surprised economists, analysts, and financiers around the world in 2023.
1. The US economy
Everyone agreed that Jerome Powell's Fed's meteoric rise in interest rates would trigger a recession in America. So far, however, this has not been the case.
The American economy has held up.
If the American economy has held up so well, it is above all thanks to American consumers, who have continued to consume despite the pressure on their purchasing power.
The explanation most often put forward to explain this unexpected phenomenon for the Fed is linked to employment, which held up well due to the millions of unfilled jobs post-Covid and post-great resignation.
2. The Chinese economy
This second surprise concerns the Chinese economy and is probably even bigger than the one linked to the American economy.
It was written in advance: after three years of COVID-19 and its brutal policy of containment, Chinese consumers were expected to drive growth through the roof with the catch-up effect.
Some even feared that the runaway Chinese economy would trigger a spectacular rebound in global inflation. But this has not been the case!
Instead, Chinese growth has been weak.
The explanation most often put forward is that the Chinese economy is weighed down by massive indebtedness, particularly in the real estate sector, where 2024 promises to be the year of all risks.
3. Inflation and interest rates
From Christine Lagarde to Jerome Powell, central bankers the world over have repeatedly said that we must prepare for inflation to become permanent.
Yet inflation collapsed at the end of the year, and long-term interest rates plummeted.
In several countries, inflation is even close to or below the obsessive 2% target that central bankers keep dreaming about every night.
The explanation is simple: our inflation has been cyclical, not structural. And when oil and food prices fell, inflation fell. Elementary, my dear Watson!
4. Oil
This is a big surprise for those who were expecting oil prices to approach $150 a barrel by 2023.
With the never-ending war in Ukraine, with Russia back on the offensive thanks to Vladimir Putin more motivated than ever with the Russian presidential election in 2024, with a conflict in the Middle East where American naval vessels are clashing with Iranian naval vessels, oil has fallen.
Oil has fallen dramatically despite the production cuts imposed by OPEC+, where Saudi Arabia and Russia will have done their utmost to try and keep up the pressure in 2023.
The explanation comes from America. America has never produced as much oil as in 2023, and global growth has remained weak.
5. Stock market indices
No one could have foreseen such a surge in stock market indices worldwide in 2023.
Here is the remarkable performance of the main stock market indices in 2023:
Nasdaq: +43.42
S&P 500: +24.2%
EuroStoxx: +19.19%
Nasdaq: +43.42%
S&P 500: +24.2%
CAC 40: +16.5%
Nikkei: +28.2%
Shanghai: -3.70%
Except for China, we're not far from euphoria!
Although this euphoria benefited a limited number of stocks, it began to spread to gold at the end of the year, which remains above the $2,000 mark. Bitcoin also benefited, with an excellent 2023, but the reasons behind this rise are linked to the likely approval of Bitcoin Spot ETFs in America in 2024, as well as the approach of Bitcoin's fourth Halving, which will take place in less than 100 days.
For more details, see In Bitcoin We Trust Newsletter:
In my opinion, the explanation behind the rise in stock market indices lies in the markets' anticipation. They have already largely played out the new rate-cutting cycle that will start in mid-2024.
Final Thoughts
For your part, what will you remember about 2023?
What surprised you most about the economy, finance, and stock markets?
Feel free to share your thoughts with me in the comments.
The American economy has held up... for now. Some caveats missed. Economy propped up by consumers going further into debt. Spend and pretend. Employment numbers are heavily manipulated, revised months later only to show majority of jobs are government jobs so not productive for the real economy.
Inflation (theft) is permanent in a fiat system by design (structural). To think otherwise is believing in unicorns and mermaids. Rate of theft is cyclical depending on where the council of elders manipulate interest rates to “solve” past missteps which further distorts price signals to the point of more make believe.
There is truth and honesty in the world though and more people will gravitate towards it than ever before in 2024. Bitcoin is becoming too obvious for the masses to ignore and this is a fabulous development for mankind.