Oslo Børs
Benchmark index in 2023
World index in 2023 (USD)

Financial markets and the economy in 2023

Interest-rate obsession

In 2023, all eyes were on monetary policy. It turned out to be a wonderful illustration of short-term noise.

At the outset of 2023, the long-predicted recession had yet to materialise. The main concern was inflation, which due to the Ukraine war and supply-chain bottlenecks had shot up and threatened to become entrenched. This had brought about a massive rise in interest rates, with the Fed Funds rate being hiked from zero to 4.25% and the yield on US 10-year US treasuries rising from 1.51% to 3.88%. How high would rates go?

Indeed, the rise continued for a couple of months into 2023. In March, losses on long-dated bonds reached such a magnitude that it led to a collapse in several US regional banks, which had to sell bonds at a loss to finance withdrawals. Shortly thereafter, Swiss banking giant Credit Suisse failed to survive as an independent bank.

The turmoil in the banking industry subsided, but the market did not become less sensitive to interest rates. The correlation between monthly changes in the US 10-year yield and the S&P 500 was a remarkable -0.78 this year, meaning that stocks systematically fell in months when interest rates rose, and vice versa. In 2022, it was -0.53 and in 2021 only -0.18. Even the STOXX Europe 600, logically more independent of US interest rates, had a similar correlation of -0.63 last year.

In a fascinating twist of fate, however, the US 10-year yield ended the year exactly where it started: 3.88%.

More on the market and the economy this year.

2023 in a nutshell
OSEBX 9.9%
S&P 500 return 26.3%
MSCI World net (USD) 23.7%
3-month NIBOR from 3.26 to 4.73%
10 year Norwegian Treasury from 3.17 to 3.25%
10 year Swedish Treasury from 2.39 to 2.03%
10 year US Treasury from 3.88 to 3.88%
Brent Blend from USD 85.91 to USD 77.04
USD/NOK from 9.85 to 10.16
EUR/NOK from 10.51 to 11.22
USD/SEK from 10.42 to 10.08
GDP growth, global 3.1%
GDP growth, Norway 0.5%
GDP growth, Sweden -0.2%
GDP growth, Mainland Norway 0.7%

Sources: Oslo Børs, S&P Dow Jones Indices, MSCI, Norges Bank, FactSet, IMF, SSB, SCB, Riksbanken, Pareto.