Overall, a good year on the stock market

Despite the tense macroeconomic situation and high fluctuations during the year, 2023 proved to be a good year for equities, and the bond markets also showed significant increases in yields in some cases.

Even though the central banks raised interest rates to a level not seen for years, the deep recession feared by many still did not materialise. The central banks’ strategy appears to be working, as inflation has fallen both in the US and in the eurozone, where it totalled just 2.9 per cent in 2023. Nevertheless, there is still uncertainty as to how inflation, which has recently started to rise again, can be brought under control in the long term.

On balance, economic growth in the US in 2023 (with GDP growth of 2.1 per cent) proved to be more robust than in the eurozone, which grew by just 0.6 per cent. With an 0.8 per cent decline in GDP, Austria is likely to have remained noticeably behind this figure.

Shares gain almost all around the world

The stock markets closed at new highs in this environment, albeit after a few ups and downs: a strong start to the year was followed by a period of consolidation due to high inflation and further interest rate hikes. A temporary recovery came to an end again in the third quarter, before the markets started a remarkable year-end rally from November onwards thanks to falling inflation and hopes of an easing of the interest rate environment.

The US stock market was driven by the “Magnificent 7”: Apple, Amazon, Alphabet, Nvidia, Meta Platforms, Microsoft and Tesla, whose share prices rose between 48 and 239 per cent in 2023. Overall, the S&P 500 gained around 24 per cent in value, while the Dow Jones rose by just under 14 per cent. Many markets in the eurozone also reached new all-time highs. The DAX proved to be one of the best performers worldwide, ending the year up 20.3 per cent. The Euro STOXX 50 also performed strongly, rising by 19.2 per cent. The leading Austrian index, the ATX, rose by 9.9 per cent in the same period.

Rising interest rates make bonds attractive again

With the rise in interest rates, the asset class of bonds came back into focus in 2023. Yields on ten-year government bonds in the US even temporarily exceeded the five per cent threshold, making bonds highly attractive for anyone looking to build up a balanced portfolio. Although yields have fallen again in the meantime, they are still around 4 per cent. European bonds remain well below this mark, but yields here have also risen significantly.