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I disagree with that notion and feel that review can help understand market psychology and reinforce the idea that it pays to have an open mind to all outcomes. Where we react dynamically to the flows seen in the market, even if you believe the broad interpretation of the outcome was incorrect.
If 2023 cemented one notion, to me it's that 95% of the time major market concerns are resolved positively, despite market participants typically initially pricing the worst-case scenario. Climbing this so-called ‘wall of worry’ often results in higher asset values.
In the process of review, I have listed some of the market moves and key macro themes which have really stood out.
When I think of market expectations and consensus views at the end of 2022, there are some big surprises that have taken place, especially in equity index returns. In fact, even if you had a crystal ball and knew the macro events that have played out beforehand, I’d argue you’d still be shocked at the way the capital markets have evolved in 2023.
Key trading themes of 2023
Most memorable macro themes of 2023
We came into 2023 with the consensus thinking the US would go into recession, the USD would underperform, EM FX would face big headwinds and it would be the year of the JPY. Many also positioned for a sizeable rebound in China’s economy and equity markets, while inflation globally was still the number one concern.
As it turned out, many of the consensus views proved to be incorrect or short-lived, and one could even argue many of those views are consensus views for 2024.
We head into 2024 expecting to be surprised once more - An open mind and a humble approach to knowing when you're wrong would have served us all well. It will in 2024 too.
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