2023: The Year the S&P 500 Roared Back

The S&P 500 has experienced a notable year in 2023, characterized by strong growth and significant sectoral shifts. At press time, the index was near all-time highs, up 25.1 per cent to 4,783.97.

Looking back from today, the last day of trading for 2023, the index saw an impressive reversal marking a period of robust recovery and gains across various sectors. This performance is particularly remarkable given the backdrop of inflation, economic recession concerns, and global uncertainties that have marked the year​​.

Throughout 2023, the technology sector emerged as the best performer in the S&P 500, benefiting significantly from the surge in demand for artificial intelligence and strong earnings growth from major companies like Apple, Nvidia, and Microsoft. This sector saw an increase of over 50% for the year. On the other hand, the utilities sector faced challenges, ending the year as the worst performer with a decline of about 10%​​.

Key events throughout the year have influenced the S&P 500’s trajectory. Starting in January, the index level fluctuated due to various factors categorized under economy, politics and geopolitics, nature, culture and technology, and markets. These events, ranging from market shifts to political developments, played a crucial role in shaping the index’s performance over the year​​.

As for individual stock performances within the S&P 500, Nvidia, Meta Platforms, and Palo Alto Networks were among the top gainers, while companies like Moderna and Enphase Energy were at the other end of the spectrum, registering significant losses​​.

Looking forward, there are anticipations around the Federal Reserve’s monetary policy decisions and their potential impact on the market. The performance of the S&P 500 in the coming year could be influenced by these policy changes, along with other economic and global factors​​.

In essence, the S&P 500’s journey through 2023 has been marked by significant growth and sectoral variations, reflecting a complex interplay of economic, political, and technological factors. As investors look ahead to 2024, the focus will likely remain on how these dynamics continue to shape the market landscape.

S&P 500 2023 vs. 2022

For investors looking for relief this year, they got it. 2023 was a complete reversal of course over 2022 for the S&P.

In 2022, the S&P 500 experienced a significant downturn, marking a challenging year for the U.S. equities market. The S&P 500 Price index returned -19.64% for the year. However, when considering dividend reinvestment, the total return for the S&P 500 was slightly better at -18.32%. This decline was a stark contrast to the stimulative environment of the early COVID pandemic years. The fall in stock values was influenced by various global central banks, including the Federal Reserve, raising interest rates and reducing asset holdings on their balance sheets.

Throughout 2022, sector performance within the S&P 500 varied significantly. The energy sector was the standout performer, benefiting from the global energy crisis and rising oil and gas prices, partly due to sanctions against Russia. In contrast, sectors like technology and communication services underperformed, largely due to the impact of rising interest rates on the value of future earnings, increasing the cost of capital. Other sectors like real estate, consumer cyclical, and materials also lagged behind the overall index performance​​​​.

The overall downturn in 2022 represented a shift from the previous bullish years, driven by multiple economic factors and global events. This period underscores the cyclical nature of the markets and the impact of broader economic policies and global situations on stock market performance.