2023 is now financial history and it will forever be recalled as a year that faked out investors. At the end of 2022, the usual warning signs of recession were flashing red, and the stock market was priced only slightly higher than the post-pandemic bear market low. Defying all expectations, stock prices closed 2023 with a 12-month gain of 24%. Not in recent memory has an outlook so bleak been followed by such strong stock appreciation and economic growth.

A year ago, a 10-year U.S. Treasury bond yielded less than a three-month Treasury bill. An inverted yield curve — when bond investors are not paid a premium longer-term bonds than 90-day day T bills, is a signal a business slowdown and recession are ahead. In addition, one year ago, the U.S. Index of Leading Economic Indicators was signaling a recession was likely within months. The LEI is comprised of 10 components and slumped months ahead of every recession in modern history (except the pandemic recession).