GLOBAL MACRO OUTLOOK~2024 — by Hive Ventures
2023 Q4 Market Review: Booming Tech Outshined Rolling Recession Risk
Global Markets Follow US Lead Amid Recessionary Fears
Despite looming macroeconomic uncertainties, the US equity market staged an impressive comeback in 2023 Q4, fueled by positive sentiment surrounding accommodative monetary policy and robust GDP growth. The S&P 500 index surged 26.3% for the quarter, marking its best quarterly performance since 1998, as investors shrugged off concerns and embraced risk assets.
Developed markets outside the US also experienced significant gains, albeit amid fears of an impending global recession. The FTSE 100 index in the UK rose 7.9%, while the Euro Stoxx 50 index climbed 15.8% during the same period. Emerging markets, facing headwinds from China’s economic slowdown and regulatory challenges, managed to post a respectable gain of 10.3% for the quarter, despite concerns over global economic fragility.
FIGURE | MAJOR STOCK MARKET INDICES RETURNS (2023Q4 & FULL-YEAR 2023)
Unconventional Economic Trends Defy Recession Predictions in 2023
Contrary to widespread recession forecasts at the outset of 2023, the year concluded with a surprising absence of economic downturn, prompting optimism across various sectors. Horizon, maintaining a stance against the recession narrative, pointed out multiple indicators of economic strength that could avert prolonged negative growth.
Several unconventional factors have shaped the current economic landscape, deviating from traditional business cycles. Notably, high deficit spending levels, coupled with volatile job market dynamics, have contributed to a unique economic scenario. Despite fluctuations, indicators such as the “Sahm Rule” suggest no immediate recession.
FIGURE | JOB OPENINGS RETURNING TO PRE-PANDEMIC LEVEL
Consumer spending patterns have also undergone significant shifts, with expenditures transitioning between goods and services. While waves of economic weakness have been observed, particularly in goods-producing sectors, a resilient consumer base and manageable household debt levels have bolstered overall stability.
FIGURE | CONSUMER’S CHECKING ACCOUNT BALANCES ARE HIGH
Tech Stocks Rebound Strongly in 2023, Among Best Years in Decades
Tech stocks staged a remarkable recovery in 2023, propelling the NASDAQ to one of its strongest performances in the past two decades. Following a dismal 33% decline in 2022, the NASDAQ surged by 43%, marking its best year since 2020. This gain was only narrowly surpassed by the index’s performance in 2009, coming out of the dot-com crash. The NASDAQ now stands just 6.5% below its record high set in November 2021.
Driving this resurgence was a return to risk-taking, fueled by the Federal Reserve’s pause on interest rate hikes and a more stable inflation outlook. Companies also benefited from cost-cutting measures implemented in late 2022, focusing on efficiency and profit margins.
GenAI emerged as a key driver of excitement within the tech sector, spurring investment in what is perceived as the next major innovation. NVIDIA, a leading chipmaker, experienced significant gains, with its stock price soaring by 239% in 2023. The company’s GPUs, essential for training and running advanced AI models, saw high demand from cloud vendors and startups. NVIDIA’s CEO, Jensen Huang, likened the current AI advancements to the “iPhone moment,” signaling a transformative shift in enterprises’ AI strategies.
Although the tech sector saw a robust rally in 2023, public investors faced a scarcity of new opportunities throughout the year. Following a lackluster 2022 for tech initial public offerings (IPOs), there was a notable absence of new listings in 2023. The year witnessed minimal activity in the IPO market, with only a handful of noteworthy names making their debut. Among these, Instacart, Arm, and Klaviyo stood out, with all three conducting their IPOs within a single week in September.
FIGURE | ONE-YEAR PERFORMANCE OF THE MAGNIFICENT 7 STOCKS TO THE S&P 500
We are well-versed in the cyclical nature of the stock market, where today’s favorites may face future challenges due to evolving economic, technological, or geopolitical shifts. Nevertheless, we anticipate that the surging market interest in AI stocks will not only propel the advancement of these sectors but will also generate new investment prospects. The heightened attention on AI stocks is poised to expedite their growth, further reinforcing our confidence in the potential returns and opportunities offered to our investments in this dynamic and rapidly evolving landscape.
