Why Everyone Got Everything Wrong: The Stunning Lessons From 2023 And What To Expect In 2024

In the must read 2024 Outlook note (available to pro subs in the usual place) published by BofA's derivatives team led by Benjamin Bowler, the strategists summarize tongue-in-cheekly that "2023 defied almost everyone’s expectations", which is a polite way of saying that everyone got everything this year wrong, to wit: "recessions that never came, rate cuts that didn’t materialize, bond markets that didn’t bounce (except in short-lived, vicious spurts), and rising equities that pained most managers who remained cautiously underweight." The only thing that shouldn’t have been a surprise, Bowler writes, was the fact that 2023 was such a surprise, given we are in an unprecedented era of macro uncertainty.

Below we excerpt some of the key observations from the report including a handful of charts which we believe traders will find very useful, starting with Bowler's astute recap of what is now a completely broken "market":

Years of conditioning by policymakers and cautious positioning have made upside a greater fear than downside, and this more immediate threat battles for attention with material (but more ephemeral) fundamental risks. This has led to erratic, highly reflexive markets, as they flip-flop between narratives that fit the most recent price action. It has also caused actives to underperform, with hedge funds failing to beat cash this year.