After a tumultuous year in 2022, a year in which both stocks and bonds fell by double digits, stocks came roaring back in 2023. There are several factors that drove global equities higher in 2023 including low expectations, the absence of a global recession, and a faster than expected decline in the rate of inflation. Going into 2023 there was widespread fear about a recession on the back of surging inflation that had not been seen in decades. In response to this inflationary phenomenon, most central banks around the world raised interest rates aggressively during 2023. Given this backdrop, the consensus view was that the global economy was going to tip into a recession. The United States was front and centre as part of this recession call. In fact, the U.S. Conference Board’s recession probability model called for a 99% chance of a U.S. recession at the beginning of 2023. However, and as we all know, a recession did not materialize. Not only did a recession not occur, but inflation started falling at a very rapid pace towards the end of the year. Given these developments, global equity market generated attractive gains in 2023 as seen in the chart below.