2023: Our Greatest Hits, Our Gravest Misses

Our very out-of-consensus call for no recession was perfect. Our call for disinflation was correct, but we were about three months early. Our call for the Fed to stop raising rates was early, too. The first “pause” came two FOMC meetings after we expected the halt. We said US stocks would recover to new all-time highs, and they did on the same day two weeks ago that the Fed finally definitively pivoted. We correctly said that the failure of Silicon Valley Bank would not be systemic, and that it would result in a deceleration of bank credit, but not a freeze. We recognized immediately the historic importance of the arrival of large language models as the portal to AI for the masses, and the bulk of S&P 500 earnings growth has come from stocks related to that. We were correct that US stocks would strongly outperform European stocks, but very wrong that Chinese stocks would be the world’s best performers (they were the worst). Our call for oil has been generally accurate, capturing the year’s price-range. Our worst call was long-term Treasuries, because we were too early on the Fed. There will be a positive total return for the year, but there was a brief but agonizing draw-down before the Fed revealed an intention to pivot. We didn’t capitulate.