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The year 2023 was a huge year for stocks, after a terrible year for stocks. A handful of huge stocks provided extraordinary power to drive stock indexes higher in 2023. And then, during the last two months of the year, there was the mania over the Federal Reserve's gazillion rate cuts in 2024, which not only threw more fuel into the stock market, but also upended the Treasury market and caused the 10-year Treasury yield to tumble down the mountain in two months I had spent. eight months going up.
These huge moves in the stock market undid much, but not all, of the damage that 2022 had caused, and it was unevenly distributed.
Indices dominated by major stocks, including the Magnificent 7, hit new highs (Nasdaq 100, NDXand the Dow, dji).
Despite this great year for stocks, the Russell 2000 (RTY), which tracks 2,000 small-cap stocks, ended up where it was in early January 2021, three years ago. The S&P 500 (SP500, SPX) ended below where it had been two years ago, and the Nasdaq ended where it had been in August 2021. So here we go:
The S&P 500 index It increased by 24% in 2023, thus reversing the 19.4% drop in 2022, and closed the year at 4,770. Almost but no cigarettes. At the close, it was 0.5% below the all-time high of 4,796 that occurred two years ago on January 3, 2022. Well, maybe next year or whenever.
The years 2022 and 2023 were quite a spectacle, with many massive ups and downs, to end up almost in the same place where it had started two years earlier (all historical index and stock data via YCharts):
The Nasdaq Composite (IND COMP.) it rose 43% in 2023, a huge rebound, thus reversing almost all of the 33% drop in 2022, and closed at 15,011. But it was still 7% less than its all-time high in November 2021.
The index reached this level for the first time in August 2021. So, after 27 months of high volatility, it ended up in the same place.
Let's analyze this a little.
The Nasdaq 100 (NDX), which tracks the Nasdaq's 100 largest stocks, excluding financial companies, soared 54% in 2023, erasing its 33% decline in 2022, plus a little, and began hitting all-time highs in December. It closed at 16,825, up 2.4% from its previous high in November 2021.
That 54% increase was the best year since the dot-com boom of 1999, which was followed by... Oops!
A handful of huge stocks with big rallies boosted those indexes. Those mega-caps weigh more on the Nasdaq 100 index and fueled its rise.
The Dow Jones Industrial Average, which track the biggest stocks in each industry, 30 of them, rose 13.7% in 2023 and in December began to hit all-time highs, closing the year at 37,690, having more than erased their 8.8% drop in 2022 It is now up 2% from its previous all-time high on January 3, 2022 (the Dow is structured as an average of the prices of 30 stocks, so it has some quirks).
In contrast, the Russell 2000 index, which tracks 2,000 small-cap stocks, ended the year lower than where it was three years ago. In 2023 it increased by 13.7%, not enough to offset the 21.6% drop in 2022. With an index value of 2,027, it is back to where it was at the beginning of January 2021, three years ago.
And it's down 17% from its all-time high in November 2021. So those three years have been a wild, non-stop ride through hell.
The Mag 7 from November 16, 2021.
The Nasdaq peaked in mid-November 2021 and is still below that level. Therefore, we will use November 16 as a starting point.
Since November 16, the share prices of these seven huge stocks have swung in different directions, with Nvidia (NVDA) at the top (+64%) and Tesla (TSLA) at the bottom (-29%). Amazon (AMZN) and Alphabet (GOOG,GOOGLE) are also still below mid-November 2021:
It wasn't easy to get there. By November 2022, all Mag 7s were in the red as of mid-November, with GOAL it was down 73% on the low end and Apple was down just 3% on the high end.
The Mag 7 from November 16, 2022.
The prices of these 7 stocks skyrocketed. At the high end, Nvidia increased 252%, Meta 207% and Tesla 120% in those 13 months. At the lower end, Microsoft (MSFT), with a market capitalization of almost $3 trillion, rose 60%; and apple (AAPL), the world's largest company with a market capitalization of nearly $3 trillion, was 53%. These two companies combined gained $3 trillion in market cap in 13 months!
These are stocks with gigantic market capitalizations. Combined, the seven stocks have a market capitalization of $12 trillion. And so, they move the broad indices greatly, and over the last 13 months, their massive rise fueled the rise of the broad indices they dominate.
Well, the 10-year Treasury yield...That was fun too. It ended 2023 at 3.88%, back to the base point it had ended 2022 at (3.88%), so it didn't go anywhere during those 12 months, but it sure climbed a big mountain for 10 months with a lot blood (including collapsing banks), sweat and tears, and then, amid the mania over zillions of Fed rate cuts in 2024, it fell again in two months.
In this cycle, the 10-year yield had reached 3.88% for the first time in its rise in September 2022.
Barely visible on this chart: The 10-year yield actually rose over the past two days by a combined 9 basis points, as the mania over the Fed's zillion rate cuts began to fade.
Editor's note: The summary bullets in this article were chosen by Looking Alpha editors.
