PWM Market Strategist Mike Antonelli and Investment Strategy Analyst Ross Mayfield

All That Matters: What Mattered in 2023?

Mike and Ross wrap up the final episode of the year by digging into what really drove the markets and economy in 2023.

What Mattered in the Market?

Mike: Markets just had one of their best Novembers of all time after looking less rosy for much of 2023. The three things that mattered to the markets this year: Earnings, Yields and The Magnificent 7.

Corporate earnings grew in 2023, and earnings drive the stock market. Earnings came in strong in large part because a strong labor market gave people the confidence to spend.

We’ve talked about yields before. Bond yields rose in the months when the Fed was hiking interest rates to fight inflation, and yields have fallen over the past month since the Fed stopped raising rates. Investors watching those rates fall also affected the stock market.

Ross: The 10-year Treasury yield peaked at about 5% on October 19. At that point, the S&P 500 was up a little bit, and the ”average stock” was flat to down. From there, the 10-year plummeted to 4% and stocks went on an incredible rally. Because rates came down, it was one of the best Novembers of all time.

Mike: Some people bemoan the fact that seven companies are driving the stock market, but we want these stocks to be doing well! Everybody owns these companies – they’re in all the large-cap mutual funds and indices – so these Tech-related stocks doing well helped the overall market.

Ross: Yeah, it would be a lot worse if the Magnificent 7 were doing poorly. Does it mean the S&P 500 is a little concentrated? Sure. But the historical data shows that market concentration doesn’t really matter for forward returns.

Mike: November was the ninth best month in the last 50 years. Missing a month like that dramatically impacts your ability to reach cherished goals. So what mattered most to your portfolio this year is probably how you reacted to last year. Did last year scare you? Did inflation knock you off your plan or knock you out of the market? Or did you understand that the world is about ups and downs, and that ups and downs are part of being an investor? 

Ross: As we entered November, people were feeling very bearish after a rough September and October. If that caused you to pull out of the market or go to cash, you missed out. That’s the story of investing over 10-30 year time periods.


What Mattered in the Economy?

Mike: There was a lot of negativity going into this year about the US economy. A fair amount of strategists were talking about a recession, the inverted yield curve, and the after-effects of monetary tightening as the Fed raised interest rates. It’s a tough to try to predict a recession. But a recession didn’t come and what I think really mattered was that the average consumer was in good shape with a strong housing market, solid jobs market, and moderating inflation. At the end of the day what really mattered was the resilience of the US consumers—not inverted yield curves or all these technical indicators we look at.

Ross: What gives people the most confidence to go out and spend is knowing they’ll have a job when they show up on Monday. The labor market has been strong despite higher interest rates. And while inflation is awful and does hurt, wages are surpassing inflation and people can feel that. Higher rates had an impact, but we’ve had a decade-plus to lock in long-term debt at low rates. Over 60% of homeowners have a mortgage under 4%. It’s the same for companies that issued debt during the pandemic at really low rates. They haven’t felt the sting of higher rates all that much. That’s what made a pretty strong economy possible in a year like 2023, when it was reasonable to expect a recession based on circumstances and history.

Mike: When you snap a bullwhip, you get this up and down effect. We break the world during COVID and we start the bullwhip: we stimulate the economy, then the economy slows, then supply chains break and then they get fixed again. This bullwhip effect is starting to narrow as we near four years from the start of the pandemic.  As we go into next year, I think that will be a tailwind.


What Mattered in the Culture?

Mike: Three things I think really mattered this year: AI, Barbenheimer and Taylor Swift.

Artificial Intelligence is this emergent productivity enhancer that may put an accelerator into the labor force and into the economy.

Ross: AI really matters. It helped the corporate world get excited about something and start spending at a time when it wasn’t clear what the next driver of economic growth would be.

Mike: The Barbie and Oppenheimer movies came out at the same time, and it was a sort of cultural moment. We all went to the movie theaters together. Don’t minimize how important cultural moments like this are.

And then Taylor Swift. This person really did affect the economy and the vibes. I know you’re tired of me saying this, but she was just Time Person of the Year which I think is well-deserved. Her Eras tour helped to keep consumer spending up.

Ross: And if Taylor Swift’s not your thing, the numbers on the Beyonce Renaissance tour are similar. We’re not talking millions; we’re talking billions of dollars of economic growth that goes town to town and stimulates economies. People are getting out post-pandemic, their spending is bolstered by a strong job market and moderating inflation, and they’re interacting with the economy again. We’ve been talking about what mattered in 2023, but in the process we’ve put a spotlight on why 2023 itself matters. I think we could be talking about and reflecting on 2023 for years to come.

If you have additional questions on how the market might influence your portfolio and broader plans, your Baird Financial Advisor is only a phone call away. For more insight into managing your portfolio, check out our articles on and the latest issue of Digest.


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