Three Big Finance Headlines for 2023
While 2022 may go down as one of the toughest market years we have worked through in recent memory, 2023 gave investors some notable news to chew on. In a year that’s seen its fair share of financial gyrations and geopolitical headlines, I’ve narrowed down to three areas some themes that certainly grabbed attention in 2023 and that will continue to raise eyebrows going into the new year…
AI Acceleration
While artificial intelligence is nothing new to 2023, this has been the year when technology has moved to front-of-mind with investors. Market performance for most companies (at least through the month of October) was unimpressive but the seven largest companies in the S&P 500 made an unprecedented bull run. The common factor driving behemoth companies like Apple, Nvidia and Tesla was undeniably AI.
This has been the year where more of the long-term implications of AI have rushed to the forefront of our conscience. The powerful potential impacts (both good and bad) of technology being able to develop itself at mind-warping speed are both fantastic and frightening. A drive toward a scenario where machines are smarter and more capable than the humans that developed them leads to legitimate concerns about, among other things, jobs. Technology will replace manpower in both blue-collar industries, where robotics will soon make human intervention unnecessary, whether the job entails riveting, cleaning, driving or (gulp) flying airplanes. White collar functions, where knowledge supplants physical dexterity, will not be immune.
The pace of computers replacing human workers is unknown and vast – but this change will absolutely spread and accelerate. Humanity will need to come to terms with the changing concept of ‘making a living’. The concept of ‘Universal Basic Income (UBI)’ has been tossed about for decades and is being tested, successfully, in some areas of the US right now! Expect UBI to be a bigger part of the conversation in 2024 and beyond.
Weight-loss ‘miracle drugs’
With catchy jingles like the one from the Ozempic ad echoing through our heads, the emergence of GLP-1 inhibitors is looking more like a game-changer for several industries. It’s too early in the game to fully appreciate the full impact of these pharmaceuticals on our collective health, but it’s not a stretch to predict that we’ll see big impacts in 2024 and beyond in the healthcare and food industries.
Struggles with weight management, and the knock-on conditions like diabetes and obesity, have driven up healthcare expense steadily over the past 50+ years. It’s too early to say how much of an impact this emerging area in medicine will have on our collective health but it is certain to drive change in healthcare costs, the food industry, and perhaps other areas. Nearly every week, more potential benefits from these drugs are being investigated, including the potential for treatment of mental health issues like addiction and Alzheimer’s disease.
Costs related to these drugs put them out of reach for many who would use them for more ‘vain’ objectives of dropping a few pounds to look thinner. As more research is conducted and costs ameliorate, expect this class of pharmaceuticals to move markets in 2024 and beyond.
The year of Taylor Swift
Looking back at 2023 though a financial lens, it’s impossible to ignore the force of nature that is Taylor Swift. Her 2023 Eras Tour quite literally changed the tourism economy for major cities across the country. Global leaders have clamored to lure Swift and her entourage to bless their economies by paying a visit. If the Taylor Swift tour was a national economy, it would exceed the gross domestic products of 50 world nations.
Beyond the (nearly) universal appeal of Ms. Swift, and her ground-shaking impact on the economies of the cities she visited (literally causing a magnitude 2.3 earthquake when she played ‘Shake It Off’ in Seattle), this gave us a look into the U.S. consumer’s psyche and resilience.
It was the conventional wisdom that the economic stimulus following the COVID pandemic would have run out by this year, and spiking interest rates, coupled with soaring food and shelter costs, would push the consumer back into their bunkers and slow the economy into a recession.
While the Eras tour proved that there were still some teeth left in the consumer’s power to ‘revenge spend’, it’s becoming more apparent that this capacity might be diminishing. Credit card balances now exceed $1 Trillion and carry an average interest rate near 20%. Even though household wealth is about 35% higher than it was in 2019, this could be a sign that we are never ever getting back together with the level of conspicuous consumption we’ve seen in the past three years. Many a blogger, though, has found themselves eating their words when it comes to the U.S. consumer’s capacity to spend, though.
