It’s been a roller coaster of a year in finance, and we’re only halfway through. Banks fell, interest rates rose, lawmakers played chicken with the debt ceiling, and we held our breath waiting for a recession that, so far, has yet to materialize.
Just in case you’ve forgotten just how tumultuous 2023 has already been, here are some of the most important stories for CFOs from the wild first half of the year:
- The rate hikes just kept coming. In an attempt to fight inflation, the Federal Reserve raised interest rates .25 points in each of its February, March, and May meetings. That made for a streak of 10 consecutive rate hikes since March 2022, bringing the federal funds rate from 0.25% to 5.25% in the space of a little over a year.
- We witnessed the three largest bank collapses in US history. The rise in interest rates contributed to the fall of Silicon Valley Bank on March 10 and Signature Bank on March 12. Depositors’ faith in the banking system was shaken, and the contagion spread as far as the EU, where Credit Suisse collapsed and was bought by competitor UBS Group on March 19. The crisis left First Republic Bank tottering. An infusion of $30b in April bought it some time, but it fell on May 1 and was sold to JPMorgan Chase in the second-biggest bank failure in American history.
- The debt ceiling crisis came down to the wire. On January 19, the US reached its debt ceiling, leading to months of wrangling in Congress. Republicans wanted to see spending cuts, among other concessions, before they would pass a bill to raise the debt ceiling, while President Biden and Democrats argued that the bill should pass without any preconditions. The two sides came to a consensus only days before June 5, the “X date” when the US was projected to run out of money to pay its debts.
- AI buoyed the stock market. The massive buzz around ChatGPT and similar forms of generative AI led companies to invest billions in the technology. Tech giants like Microsoft and Alphabet saw record stock gains as investors boarded the AI bandwagon. Perhaps the biggest winner, though, was chipmaker Nvidia. In June it became only the seventh US company to be worth $1 trillion.
- Warning signs loom, but no recession yet. Many analysts have predicted a recession in 2023, and we’ve seen warning signs of one, including high inflation, layoffs in the tech and consulting sectors, and indicators that consumers are cutting back on discretionary spending. The New York Federal Reserve’s recession indicator, which is based on the yield curve, suggests we have a 70.85% probability of a recession by May 2024. That said, the US GDP grew in the first quarter of 2023 and is on pace to grow again next quarter, and the job market is strong, so we aren’t in a recession just yet.