From an investing perspective, 2023 was simple and pretty great. If you were invested in the markets, you made money – with the bulk of the year’s returns coming in the fourth quarter. If you held tech stocks, you made a lot of money.

At the time of writing, the Nasdaq is up 43%1 and the S&P 500 is up 23% year-to-date with an average annual return exceeding 10%. These massive gains were all largely the result of the rising tide that is the Magnificent 7: Microsoft, Apple, Alphabet (formerly Google), Amazon, Meta (formerly Facebook), Nvidia and Tesla (technology/car company).

For investors who opted out of tech, they received all of the year’s return over the last six weeks. Banks, retail, industrials are all moving up thanks to easing inflation and the U.S. Federal Reserve’s pause on interest rate increases.2 The Dow Jones Industrial Average is up more than 13%3 and the TSX is up more than 7% 4.

While tech was the biggest investment story – and winner – of 2023, it certainly wasn’t the only one.

Let’s journey through the themes that shaped 2023 for investors.

Negative vibes

In 2022, markets ended the year down. Coming into 2023, many investors and analysts were feeling negative about what the year would bring. Pundits got louder in their predictions of an impending recession – a theme that continues to this day even though the U.S. and, to a less- robust degree, the Canadian economies are holding their own.

Of course, as is always the case, contrarian investors saw the dip in the markets as a time to buy the good value stocks hit hardest in 2022 and set themselves up for a fantastic year. As noted, the markets have been dominated by big cap tech, which led to a late-year rally and brought the S&P 500 to a new closing high for 2023 (not an all-time high).5

The one-two punch of rising inflation and interest rates

Interest rates have been the driver of the markets all year. Realistically, interest rates always drive the markets. However, businesses and investors had enjoyed low interest rates for decades, until last year, when rising inflation led the Federal Reserve and Bank of Canada to implement a seemingly endless series of interest rate hikes, increasing the cost of borrowing in an effort to cool spending and slow inflation. With inflationary pressures lessening, both central banks have stopped increasing interest rates – their only tool to fight inflation. Now the question is: When are we going to see our first interest rate cuts?6

Hopefully the central banks don’t wait until they reach their stated target of 2% inflation before they start cutting interest rates.

A mini-U.S. banking crisis

Smaller U.S. regional banks were among the first to feel the strain of a fast-rising interest rate environment. Over the course of a few weeks this past spring, Silvergate Bank, Silicon Valley Bank, Signature Bank and First Republic Bank in the U.S. collapsed, triggering a selloff and causing regional bank stock prices to nosedive. A bigger crisis was averted only because the Federal Reserve stepped in to provide emergency loans and a few much larger banks, including JP Morgan, bought up the assets of the failed banks.7

The impact of AI and ChatGPT

The rise of technology stocks is nothing new. The Magnificent 7 have led the markets for years. What’s different today is that artificial intelligence (AI) is finally delivering on its long-discussed potential to change the world – or at least how we live and work. This year, we got a taste of that potential with ChatGPT, a chatbot powered by generative AI. Since its launch in November 2022, hundreds of millions of people have experimented with it to boost productivity, create content, book trips, code and analyze data and more.8

Cryptocurrency re-emerges

Crypto proved it’s not going away. After the crypto “winter” of 2022, Bitcoin prices surged 128% year-to-date.9 At some point, The Securities and Exchange Commission in the U.S. will recognize it. There is already talk of a Bitcoin ETF. Right now though, in my view, cryptocurrencies and the ecosystem supporting them still represent a lot of risk (see the fall of FTX). For myself, I’m willing to give up today’s gains and wait to invest until crypto is more established and I have more confidence in it.

Global instability

In October, Israel officially declared war on Hamas. Initially, with respect to the war’s impact on the markets, it was anticipated that the price of oil would shoot up. That hasn’t happened. The cost of a barrel of oil still sits in the mid US$70 range. That’s because the U.S. is the world’s most dominant oil producer and exporter, producing more than 13 million barrels of crude oil a day.10 Meanwhile, the war in Ukraine continues, but again, the direct impact on the stock markets has been negligible.

Biggest takeaway from 2023

It’s a lesson investors keep learning: you can’t time the markets. Certain North American indices did not rise for the first 10 months of the year. This was especially true for smaller indices such as the TSX, which did not benefit from the tech rebound but is ending the year on a high. As investors, we have to be patient.

What’s ahead for 2024

If the central banks continue to hold interest rates steady and start to cut them at some point, as anticipated, I envision double-digit returns. We may not hit the highs the S&P did this year, but I still think returns will exceed historical averages. For readers who fear that this year’s highs were too high and we’re headed for a fall, I want to remind you that markets set new records on a regular basis. In 1972, the Dow Jones Industrial Average broke 1,000 for the first time11. Today it’s 37,000. Markets go higher. They pull back. They regroup and return to their former highs and then surpass those highs. That’s what happens time and time again. The markets, like the companies they hold, will continue to improve, innovate and grow. That’s why being invested is the best way to grow your wealth.

Call Me or Email Me
My approach to investing is straightforward. I study the markets, global economies and what’s happening within industries to be in a position to best help my clients find good quality investments that will help them meet their goals. I build custom portfolios for each client. I welcome you to call me at 416-332-3863 or email me at allan@allansmall.com.


  1. NASDAQ Composite Index, Barrons
  2. Fed holds rates steady, indicates three cuts coming in 2024, CNBC
  3. Dow Jones Industrial Average, MarketWatch
  4. S&P/TSX Composite Index, MarketWatch
  5. Resurgent S&P 500 crests new 2023 closing high after roller-coaster year, Reuters
  6. Fed holds rates steady, indicates three cuts coming in 2024, CNBC
  7. Market Performance, Forbes
  8. What is ChatGPT?, Business Insider
  9. Market Performance, Forbes
  10. As 2024 Approaches U.S. Leads Global Crude Oil Production, Forbes
  11. Milestones Of The Dow Industrials, CNBC