How I, and Everyone Else, Got 2023 So Wrong

It is good practice to learn from your mistakes, but even better is to learn from other people’s mistakes. My biggest error in 2023 was the same as everyone else’s: being in the consensus that the fastest rate hikes in 40 years would cause a recession. They didn’t, but there is still deep disagreement on why—and the direction of your portfolio depends on the answer.

As a reminder, at this time in 2022, predictions of recession were the norm—and on some measures stronger than they had ever been outside an actual recession. I wasn’t persuaded by the economic models, because they paid no heed to the effects of the pandemic on supply and demand. But I thought it unlikely that the nascent stock rally would continue, because it was a bet on inflation’s coming down without the economy being hit. How likely is that? Not very. Except that it happened.