2023 in Review: Top 10 trends that caught investors' attention this year

livemint.com:

Decline in inflation: In the realm of developed markets, central banks made significant strides in curbing inflation without inflicting substantial harm on their respective economies throughout the past year. Notably, the United States, despite the Federal Reserve initiating its most assertive tightening cycle in over four decades, managed to steer clear of a recession. The effective policies implemented by developed market central banks underscore their adeptness in navigating the delicate balance between taming inflationary pressures and ensuring the sustained health of their economies.

The successful management of these challenges reflects a level of resilience and strategic decision-making that has safeguarded economic stability in the face of tightening monetary conditions. 2. US yield: The abrupt surge in the US 10-year yield took investors by surprise, with the rate breaching 5%, a level not seen since July 2007.

Investor concerns were heightened by Fitch's downgrade of the US country rating, shedding light on the high fiscal deficits. The Federal Reserve's unwavering commitment to maintaining higher rates for an extended duration also contributed to this movement. Nevertheless, a shift occurred as inflation started to ease, prompting investors to factor in potential rate cuts.

Consequently, the 10-year yield retraced swiftly in the last two months. Investors should exercise caution, considering the Federal Reserve's current reduction of its balance sheet and the diminishing demand from the two largest overseas buyers of US Treasuries, namely China and Japan. With these factors in play, long-term US Treasury yields are expected to stabilize at a higher level compared to the pre-pandemic period.