2023 Economic & Market Update

February 2, 2024 - 


  • Despite elevated interest rates, U.S. economic growth remained robust, and global markets rebounded strongly in 2023. 
  • Inflation continued to decline, as markets factored in the anticipation of the Federal Reserve lowering interest rates 5-6 times in 2024.
  • Forward-looking indicators suggest a potential softening of economic growth in 2024 amid slower manufacturing activity and a decrease in demand for labor. 


U.S. economic growth remained robust in 2023. Despite elevated interest rates, consumer confidence improved, supported by declining inflation and steady wage growth. The strong labor market and brisk consumer spending drove fourth quarter U.S. GDP growth to 3.3%, its sixth consecutive quarterly gain. 

  • The U.S. labor market remains healthy, with the national unemployment rate near historic lows, closing the year at 3.7%, yet there are signs of cooling, as job openings and employee turnover declined during the quarter. 
  • Headline U.S. inflation, as measured by the Consumer Price Index (CPI), closed the year at 3.4% on a year-over-year basis, compared to a rate of 6.5% a year earlier. Moreover, core inflation (CPI excluding energy and food prices) rose 3.9% over the same period, with shelter (rent) accounting for more than two-thirds of core CPI’s increase in 2023.  
  • 2023 saw a wider divergence between economic growth rates in the U.S. versus the rest of the world, as growth weakened in Europe, Japan and China amid a slowdown in manufacturing and consumer spending, higher interest rates, persistent inflation and increasing geopolitical tensions. 

Interest rates fell in 2023 as inflation pressures moderated and markets priced in higher expectations that global central banks will loosen monetary policy restrictions in 2024. Buoyed by falling rates, global capital markets rebounded strongly in 2023, ending the year with broad-based gains in fixed income and equities, up 5.5% (Bloomberg U.S. Aggregate) and 22.2% (MSCI ACWI), respectively. 

The U.S. dollar weakened considerably during fourth quarter, falling 4.8% (ICE U.S. Dollar Index) as market expectations for Fed rate cuts grew. For the year, the dollar fell 2.1%, declining against the euro, the pound and most other currencies, except for the yen, where it strengthened 6.4%. 

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