2023 Financial Review

From interest rates skyrocketing to recent record highs to AI investing leading the market, 2023 has been a crazy year in financial markets! Many things happened that we could not have predicted. Today, we are going to break down our top 6 events of financial markets in 2023.

1. The Great Interest Rate Hike: 2023 saw central banks globally, particularly the Federal Reserve, aggressively raise interest rates to combat inflation. This "Great Hike" sent shockwaves through markets, triggering widespread sell-offs - particularly in bond and tech sectors - while impacting borrowing costs for businesses and individuals. This was marked by the FED raising interest rates to 5.25-5.50%, a recent record high. 

2. The AI-Fueled Tech Surge: Early in the year, an upsurge in Artificial Intelligence (AI) stocks sent them soaring, driven by optimism about the technology's potential and investor FOMO (fear of missing out). This surge, however, proved short-lived and fizzled out as broader market uncertainty set in. This did not stop Microsoft from investing $10B in OpenAI and Nvidia from reaching a $1.2B market cap. 

3. The Crypto Comeback and Crash: Following a brutal 2022, cryptocurrencies staged a comeback in the first half of 2023, with Bitcoin doubling in value by April. However, the gains were not sustainable, and a "crypto winter" returned in the second half, wiping out many recent gains and further shaking investor confidence. Crypto has continued to rebound as companies like BlackRock filled for Bitcoin ETFs and look to list early next year. 

4. The Global Commodity Market Turmoil: Geopolitical tensions and supply chain disruptions sent commodity prices (especially energy and food) on a rollercoaster ride in 2023. Initial spikes, fueled by concerns about the Ukraine war, later gave way to a correction as recessionary fears grew. Things continue to be uncertain as a new war picks up in the Middle East and oil demand drops. 

5. The Banking Crisis and Bailouts: The relentless interest rate hikes triggered a credit crunch and a banking crisis in the second half of 2023. Several major financial institutions, famously Silicon Valley Bank, faced insolvency, leading to government bailouts and further market instability. This was marked by First Republic Bank becoming insolvent and J.P. Morgan buying the bank. 

6. The Rise of Decentralized Finance (DeFi): While centralized crypto exchanges faced turbulence, DeFi gained traction in 2023. DeFi platforms, offering peer-to-peer financial services without intermediaries, attracted growing interest as an alternative to traditional financial systems. This would be no surprise later as crypto giants like Binance and FTX saw their Founders and CEOs found guilty of financial crimes in the US. 

What do you think will define the financial markets in 2024? Follow us on social media and at arbitragetrade.com to keep up with the latest financial news and market trends.