Bloomberg - Evening Briefing - The year the Fed won

This year has certainly delivered spectacular highs and excruciating lows in business—and many unexpected twists and turns. Stocks were supposed to slump and bonds rally, but that didn’t play out as the US Federal Reserve seems to have engineered an elusive soft-landing. Emerging markets had a banner year and crypto rose from the ashes after some eye-popping scandals. The combined net worth of the 500 richest people surged by $1.5 trillion, fully rebounding from the $1.4 trillion lost the year prior. Nobody fared better wealth-wise than Elon Musk, who also notched some of the year’s most notable CEO mishaps. Nobody had a swifter fall than Sam Bankman-Fried, convicted for fraud and conspiracy and losing $16 billion in just days. L’Oreal heir Francoise Bettencourt Meyers became the first woman with a $100 billion fortune. Taylor Swift’s concert tour brought in as much money as the economies of some small countries, propelling her to the rarified status of music billionaire. And did we mention this was the year artificial intelligence star ChatGPT changed everything? 

With the Federal Reserve signaling that it’s likely done raising interest rates to tame inflation, markets are ending the year on a high note. The S&P 500 is nearing a record and the global bond market is on track to post its biggest two-month gain ever. Traders are ramping up expectations that central banks everywhere will slash interest rates next year. With all the predictions of a US recession falling flat in 2023 (and the year before), now the outlook is moving beyond monetary policy to disruption by things like attacks on Red Sea shipping, corporate earnings and the US presidential election. For investors, here are five things to look out for in the new year. 

Russian forces pounded mostly civilian targets in Ukraine with the largest missile and drone barrage of Vladimir Putin’s 22-month invasion, killing at least 26 people local authorities said. The attack came days after Ukraine struck a Russian warship off Crimea, forcing the Russian Navy relocate vessels from waters near the occupied Ukrainian peninsula. While Ukrainian President Volodymyr Zelenskiy visited troops in the eastern area of his country engaged in heavy fighting, Putin was busy shaming Russia’s celebrities over a decadent party. And in the Middle East conflict, Israeli Prime Minister Benjamin Netanyahu listed three prerequisites for ending his nation’s war with Hamas.

Smoke rises after Russian rocket attacks on Dec. 29 in Kyiv, Ukraine. Photographer: Kostiantyn Liberov/Libkos/Getty Images

China approved more than 100 domestic video games this week, the latest indication that Beijing is softening its stance after its move to tighten industry restrictions led to a $80 billion rout. Apple, meantime, said it would put its latest smartwatch models back on sale in its US retail stores after it won a temporary court reprieve in a patent fight.

Just two weeks before the 2024 race officially gets underway in Iowa, Maine became the second state after Colorado to ban Donald Trump from its primary over his role in the deadly Jan. 6, 2021 attack by his followers. But in California, election officials there ruled the twice-impeached former president can compete. The US Supreme Court and its Republican-appointed supermajority is expected to take up the issue, which with others tied to Trump’s prosecution for allegedly trying to subvert the 2020 election, could throw the race into chaos. His main rival, former South Carolina Governor Nikki Haley, was forced to state that the Civil War was over slavery, something she failed to mention at a campaign event in New Hampshire. As for Florida Governor Ron DeSantis, he just can’t catch a break.

Nikki Haley Photographer: Sophie Park/Getty Images North America

The New York Times sued Microsoft and OpenAI for using its content to help develop artificial intelligence services, in a sign of the increasingly fraught relationship between the media and a technology that could upend the news industry. The Associated Press and Axel Springer already have agreements with OpenAI worth tens of millions of dollars. AI’s breakthrough in 2023, Tyler Cowen writes in Bloomberg Opinion, showed how quickly huge change can happen—and how AI may speed up the pace of change itself.  

• Global markets close for New Year’s Day.
• The 25th anniversary of the euro and of the Eurosystem.
• BRICS expands to include Egypt, Iran, Saudi Arabia and others.
• Several OPEC+ countries make additional cuts to oil production.
• US jobs report; Italy, France, Germany report on inflation.

Australia has spent the past three decades building the world’s most advanced water exchange, handing significant control of one of life’s most critical natural resources to the market. For deep-pocketed financial institutions and agribusinesses, many based overseas, water trading has been a bonanza. But the industrial-sized squeeze on water supplies has left vanishing flows for smaller farmers, animals, fish, trees and communities.

Australia has become a cautionary tale for other places looking for solutions to water scarcity on a warming planet. Photographer: Peter Waldman/Bloomberg

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