The financial markets, which ended mostly higher in 2023, saw an acceleration in momentum toward the year-end and the strength has continued in the new year. With the stock market trading at record highs, here’s a look at how the returns compare to other high-flying assets.
Rate Cut Hopes, Slowing Inflation Drive Gains: After inflation and successive rate hikes spooked investors in 2022, they came back with a vengeance in the very next year. The return of risk appetite was orchestrated by consumer price inflation, which fell back from a cycle high of 9.1% in August 2022. Corporate profit growth also remained resilient as companies resorted to measures to keep their top and bottom lines from collapsing.
On top of that, the economy witnessed robust job gains despite the surrounding economic uncertainties.
The late-year gains in 2023 came on the back of hopes that the Fed may have to reverse its rate hikes as the central bank remained on pause mode since July 2023, when it raised the Fed funds rate to a 22-year high of 5.25%-5.5%.
Another contributing factor to the market rally was the AI frenzy, which lifted companies having exposure to the technology. Mega-caps including Nvidia Corp. NVDA, Microsoft Corp. MSFT, Alphabet, Inc. GOOGL GOOG and Meta Platforms, Inc. META are at the forefront of AI revolution. It’s quite logical that when these stocks move they have the potential to take the market along with them, given their heavy weighting in the major indices.
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Gold Glitters: An outlier asset that also participated in the market rally was gold. Gold is invariably referred to as a safe haven asset that typical doesn’t do well when risk appetite is high.
The logic behind the gold rally is the dollar weakness. As the market began to price in rate cuts, the dollar began to soften and this proved to be positive for the yellow metal, which is denominated in the dollar. Gold futures hit an intraday peak of $2,454.20 on May 20 and a closing peak of $2,438.50 in the very same session. It has pulled back since then.
Bitcoin On Extended Run: After ending 2023 as one of the best-performing assets, thanks to over 155% gains, Bitcoin BTC/USD continued its stellar run in the new year. The upside catalyst was the approval of spot Bitcoin exchange-traded funds by the SEC.
The king crypto hit a record intraday high of $$73,750.07 on March 14 and a record closing high ($73,083.50) a session earlier. Since then, the crypto has seen some volatility and trades just above $70,000.
Returns From SPY, Gold Bitcoin: Assuming an investor put in $1,000 each on the SPDR S&P 500 ETF Trust SPY, an ETF that tracks the performance of the S&P 500 Index – a broader market gauge, gold and Bitcoin in the final session ahead of the Memorial Day in 2023 (May 26), here’s how much he would have now.
| No of units with $1,000 Investment | Current Value of Investment | Return | |
| SPY | 2.42 | 1,278.77 | 28% |
| Gold futures | 0.51 | $1,200.46 | 20% |
| Bitcoin | 0.036 | $2,519.60 | 152% |
The SPY ended Friday’s session up 0.66% at $529.44, according to Benzinga Pro data.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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