What drove stock markets in 2023?

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2023 has been a year of ups and downs, but what drove stock markets this year, which sectors performed the best and worst, and what could be next?

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Published on 13 December 2023

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

From the US regional banking crisis and the expansion of artificial intelligence (AI), to bond market turbulence and conflict in Israel, investors have had to deal with lots of ups and downs in 2023.

However, shares have rebounded strongly after a bruising performance last year. Given the prevailing pessimism at the start of 2023, overall shareholder returns have been remarkably resilient.

But what’s driven these returns? Well, it’s a complicated picture.

Past performance isn’t a guide to the future. *Source: MSCI, 11 December 2023.

At the macro level, the interaction between inflation, interest rates and economic growth has dominated headlines. A widely-anticipated recession has yet to appear, inflation has finally begun to ebb, and central banks have taken their foot off the interest rate hiking pedal.

We think