As this year ends, and I am thinking about how to think about the one ahead, I reflect on the one thing that surprised me the most in 2023. As 2022 ended, I expected that the US would slip into recession during 2023. The US, in fact, posted very strong growth this year. Investors who had thought the way I did and adopted a defensive investment stance would have missed out on strong performances from risky assets. Most notably, the S&P 500 returned 23% in 2023 to date.

At the end of 2022, economists surveyed by Bloomberg forecast that the US economy would grow by a miserable 0.3% in 2023. The same group now expect that economy grew by an above potential 2.4%. The median member of the Federal Open Market Committee, the body that sets monetary policy for the US, expected that growth during 2023 would average 0.5%, with some members even expecting a contraction of 0.5%. They now think the economy grew by 2.6% on average this year.  ..

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