Friday's Markets Update (December 29, 2023)

30 Dec 2023 by rate3

On Friday, the Nasdaq and other major stock indexes ended lower at the close of the 2023 trading session, after nearing record highs earlier in the week. Investors sold off profits, and assessed the Fed's future path. Despite this, the S&P and Dow posted their ninth straight winning weeks, and the Nasdaq surged by 44.5%, driven by an AI-backed rally in tech companies. For the year, the S&P 500 added 24.7%, the Dow gained 13.7%, and the Nasdaq jumped by 44.5%. Nvidia soared 245%, and Meta added 183%. Meanwhile, crypto-related stocks are declining as investors sell off, causing significant drops in crypto asset prices. However, on a yearly basis, all major crypto-related stocks are in the green, with Coinbase stocks' price skyrocketing by more than 400%. At the same time, BTC and ETH gained over 150% and nearly 100% YoY, respectively.

Details

The Chicago PMI dropped to 46.9 in December, lower than expected (51), indicating a return to contraction after November's growth, which was the first in 15 months.

World Economy

Shanghai Composite and Shenzhen Component rose on Dec 30, due to expectations of policy easing and attractive valuations in China. However, they had a decline of 3.7% and 13.5%, respectively, for the year due to the country's fragile economic recovery and lack of policy support.
Nikkei and Topix (Japan) indexes gained 28% and 25%, respectively, in 2023 due to solid earnings, tech stock rallies, BOJ stimulus, and expectations of US Fed rate cuts, making them Asia's top-performing markets.
Frankfurt's DAX 40 (Germany) index closed at 16,751 points, recording a 20% yearly surge, driven by gains in tech stocks and retailers. Europe's unexpected deceleration in Spain's inflation rate for December suggests that the European Central Bank might also consider rate cuts in the coming year.
FTSE 100 (UK) gained 0.6% in the final week of 2023, marking fifth straight week of gains. Personal goods and energy shares rose, while real estate declined. British house prices fell, but the FTSE 100 had a 3.8% yearly gain, led by aerospace and defense, and oil and gas sectors.
The CAC 40 index (France) rose by 0.3% to 7,560, with almost all constituents in the green, amid hopes of a softer monetary policy. The French stock market gained nearly 17% since January, with Stellantis being the top boost.
The FTSE MIB (Italy) was up 0.4% towards 30,500, setting it up for yearly gains above 28%. Optimism about accommodative monetary policy drove the gains.
The BSE Sensex (India) closed at 72,240, down 0.23% due to weakness in financial and energy shares. In 2023, the Sensex gained 19%, marking the second-best year since 2017, driven by domestic macroeconomic factors, corporate profits, expected rate reductions, and foreign investments.
The IBEX 35 in Spain closed slightly higher at 10,102, supported by economic data suggesting potential rate cuts by the ECB. The Spanish index soared 22.8% in 2023, driven by a strong financial sector.
The JSE All Share Index (South Africa) started higher, up 0.34%, with expectations of rate cuts. The index is expected to gain 1.8% for the week but end the year with a slight decrease of 0.18%.
The Hang Seng closed at 17,047.39 with little change, as the Chinese central bank committed to a prudent monetary policy. Financials rose, but tech, property, and consumer sectors were subdued. The index was flat for the month and saw a 14.0% yearly decline due to economic uncertainties in China and global economic risks.
The MOEX Russia index dropped slightly to 3097 on the last trading day of 2023, with little movement over the week. The December S&P Global Russia Manufacturing PMI increased to 54.6, the highest in seven years. Transport, electric utilities, and metals & mining recorded losses, while IT and consumer goods advanced. The index grew by nearly 44% over the year, helped by renewed dividends payments, disclosure of companies' financial results, and bypassing of Western sanctions.
The first week of 2024 will feature important data releases including labor market reports, FOMC minutes, and key indicators such as ISM Manufacturing and Services PMI. Global attention will also be on inflation rates, manufacturing PMI figures, and unemployment rates in various countries.

Comment: The New Year Prognosis. What could possibly go wrong?

I'll make it short and simple for you.

In case you ever wonder what's wrong with the world in one picture, have a second look at a global map of the distribution of World's USD 100 Trillion GDP. This map, under the contemporary centralized elders-clans-based governance model, basically represents the distribution of decision-making power.

According to that map, there are only seven countries whose opinions matter: the US (GDP = USD 23 Trillion), Japan (5T), Germany (4T), the UK (3T), France (3T), Italy (2T) on one side, and China (17T) on the other. These countries, with a combined GDP reaching 60% of the global economy, have the capability to finance, deploy, and maintain large military forces in the long term. Consequently, they are able to enforce compliance from other countries, for lack of a better word. More often than not, they exercise this power.

Sure, there are smaller GDP countries like Russia, Saudi Arabia, or Israel that punch above their weight, but it would be difficult for them to withstand the economic pressure of a prolonged war without some form of alliance.

At the same time, the great majority of the world's population has almost zero influence on what's going on in politics, economy, and military globally, and very often locally. Naturally, people worldwide are extremely upset with this nonsensical redistribution of wealth and power. What could possibly go wrong?

Of course, we have all become more "civilized" (or rather, lazy and relaxed) over the past hundred years or so. This means we are less inclined towards direct kinetic confrontations to resolve our differences, unlike our predecessors. Additionally, the existence of thermonuclear weapons gives us pause. However, the world is still ruled by brutal force, just as it was ten thousand years ago, and it will continue to do so until we fundamentally change our global governance model. We need to shift from a "muscles-based" approach to a "brains-based" approach. This implies that we must decentralize or face extinction.

"Why is decentralization the best solution?" you ask. It's because we have already tried everything else. Decentralization will, at the very least, give a portion of our global humanity a chance to embark on some unconventional social experiments. For instance, we could explore giving decisive political power to algorithms and crowds, connected through intelligent networks. Perhaps this approach will make a difference. If not, then we must prepare ourselves to become just another species out-competed and wiped out from the face of the Earth.

Happy New Year!