Everything Wall Street Got Wrong in 2023

All across Wall Street, on equities desks and bond desks, at giant firms and niche outfits, the mood was glum. It was the end of 2022 and everyone, it seemed, was game-planning for the recession they were convinced was coming.

Over at Morgan Stanley, Mike Wilson, the bearish stock strategist who was rapidly becoming a market darling, was predicting the S&P 50O Index was about to tumble. A few blocks away at Bank of America, Meghan Swiber and her colleagues were telling clients to prepare for a plunge in Treasury bond yields. And at Goldman Sachs, strategists including Kamakshya Trivedi were talking up Chinese assets as the economy there finally roared back from Covid lockdowns.

Blended together, these three calls — sell US stocks, buy Treasuries, buy Chinese stocks — formed the consensus view on Wall Street.

And, once again, the consensus was dead wrong. What was supposed to go up went down, or listed sideways, and what was supposed to go down went up — and up and up. The S&P 500 climbed more than 20% and the Nasdaq 100 soared over 50%, the biggest annual gain since the go-go days of the dot-com boom.

It’s a testament in large part to the way the economic forces unleashed in the pandemic — primarily, booming consumer demand that fueled both growth and inflation — continue to bewilder the best and brightest in finance and, for that matter, in policy making circles in Washington and abroad.

And it puts the sell side — as the high-profile analysts are known to all on Wall Street — in a very uncomfortable position with investors across the world who pay for their opinions and advice.

“I’ve never seen the consensus as wrong as it was in 2023,” said Andrew Pease, the chief investment strategist at Russell Investments, which oversees around $290 billion in assets. “When I look at the sell side, everyone got burned.”

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