Counting Down Five Mega Trends of 2023

“Life can only be understood backwards; but it must be lived forwards.” ― S?ren Kierkegaard

In the waning, champagne-fueled days of December, the lure of a fresh start is hard to resist. It is easy to forsake?the write-offs of?2023 for the blank slate of 2024. But a little reflection can go a long way in shaping better outcomes for the year ahead, so I would like to dedicate my final newsletter of 2023 to the trends that shaped our year - with an eye, of course, to how these storylines may fare in the months that follow. From the meteoric rise of NVIDIA to the fall of American waistlines with GLP-1s, let's look at five narratives that captured market attention through the eyes of Asset TV experts.

The strength of the U.S. consumer ballasted the economy through the most aggressive rate-hike cycle in forty years. Jack Janasiewicz, CFA ,?of Natixis Investment Managers pokes holes in the view that households are tapped out, a common theme in recession forecasts :

"There are plenty of charts running around out there suggesting that the consumer is tapped out, that they're on the verge of falling off a cliff and that's going to push us into a recession...but when you look at the household balance sheet, it's in pretty good shape. I think that's key. You need to be looking at both the asset side of the equation as well as the liability side. And there are some important trends that developed during COVID -- and the big one there is the deleveraging of the consumer balance sheet, and that's key. And that's something that gets missed in a lot of this analysis."

The proverbial magic pills for weight loss took markets by storm--so much so that pharmaceutical companies stopped advertising GLP-1s. As demand continues to outpace supply, Dan Kurland, CFA , of Columbia Threadneedle Investments, US explains the overall market impact of the medical breakthrough .

The return of income to fixed income has been a focal point of discussion this year. PIMCO weighed pockets of opportunity in a recent outlook panel, with John Kronour making the case for corporates :

?"You look at companies like JPMorgan that are printing cash--they have better fundamentals than the U.S. government. You're seeing very attractive areas in corporate bonds, and so looking at high-quality corporates in the short-term space may be a viable solution for people who are looking for alternatives to money markets or traditional Treasuries. Bottom line: they are some of the cheapest bonds we've seen in fixed income with mortgages, and even munis--that's an area that's looking attractive as well."

Generative AI and the magnificent (ahem) rise of NVIDIA buoyed U.S. equities. Srini Pajjuri of Raymond James Financial explains why the queen of the Magnificent Seven will be difficult to dethrone in the coming quarters:

"From a semiconductor standpoint, given the need for the compute and given the level of investments we are seeing that are going into infrastructure, there are a handful of companies that are seeing that benefit right now. And there are some that will eventually see the benefit. Those stocks are also benefiting from a stock price and a stock appreciation standpoint, even though they're not yet seeing the revenue contribution from AI in general. So to start with, NVIDIA is the primary supplier of GPUs that are essential to train these models, and they have seen very strong growth in the last few quarters as a result of Generative AI. And right now, as I said, the demand is still outpacing supply, and that is probably going to continue for the next few quarters and competitively, there are competitors out there, but nothing that's close to NVIDIA."

And finally, looming fears of a recession have dogged conversations this year, despite continued and unexpected resilience. ClearBridge Investments ' Jeff Schulze, CFA - a Philadelphia Eagles fan, which makes him an automatic hit in my book - explains?why Bon Jovi's "Livin' on a Prayer" is emblematic of his macro outlook for 2024.

I hope you will take some time to reflect between?present-buying, holiday-party hopping and resolution-crafting. Offer your accomplishments as much attention as your shortcomings. And don't forget to appreciate?what you have now (for, in the words of Epicurus, what you have now was once among the things you only hoped for). Your continued friendship and support is certainly something for which I am deeply grateful. ?

December is almost over!?In other words, whoa-oh, we're halfway?there...

Gillian