2023 Recap and 2024 Predictions
Twenty-Ninth Edition
Hi friends, It’s been a minute!
Blogging took a back seat in the past few months as I've been all hands on deck with the release of Off/Script. But here we are, in the 29th edition of the blog, where I’ll unpack the year with a look back at my 2023 predictions and set the stage for 2024 with some fresh takes. Let's dive in!
2023: A Year in Review
Markets
Hits:
Tech Sector's Remarkable Performance: The Nasdaq Composite and 'Magnificent Seven' tech giants delivered an impressive average return of 100%, showcasing the power of AI and cost-cutting strategies.
Bond Market's Turnaround: The second half of 2023 saw a notable recovery in bonds, driven by lower inflation expectations and rate cuts.
Selective PE Activity: PE-led buyouts prevailed, aligning with my predictions, despite an overall slowdown in PE transactions.
Venture Capital Dynamics: The VC scene was challenging, especially for late-stage startups, leading to notable bankruptcies like WeWork, Bird, and Convoy. However, I underestimated the resilience in sub-sectors such as AI and defense.
Misses:
Unexpected Market Resilience: The markets showed resilience with remarkable returns, contrary to my expectations of a hard landing.
China's Underperformance: The economic bounce back in China didn’t materialize as expected, with the U.S. outpacing China’s growth.
Overlooked Private Credit: The rise in private lending was a significant factor I missed in my predictions.
Muted Tech M&A Activity: The anticipated surge in M&A activities didn’t materialize, due to regulatory and lending constraints.
Tech
Hits:
Regulatory Heat on Tech Giants: My prediction about Apple and Google facing regulatory hurdles, like Epic’s antitrust lawsuits, was on point.
Generative AI's Rise to Fame: My call on the mainstream success of generative AI was a hit. OpenAI’s soaring valuation, Midjourney's emergence as a creative powerhouse, and Character AI’s success in entertainment are a testament to this.
Google's Gemini Launch: Foreseeing Google's entry into the AI race with a ChatGPT rival was spot on.
Crypto Slowdown: The downturn in DeFi, Web3, and DAOs due to regulatory and financial pressures played out as expected.
Social Platforms and E-Commerce: Spotting social media platforms as key players in product discovery and shopping was precise. Meta’s performance and TikTok Shop's launch significantly influenced the commerce landscape this year.
Misses:
Crypto Market's Resilience: The crypto market's rebound was quicker than I anticipated. Moreover, Solana's significant price increase and network usage growth caught me off guard, reflecting a dynamic in the crypto world that I missed (i.e. modular vs. integrated debate).
Gene Editing’s Progress: My prediction of gene editing technologies becoming mainstream was too optimistic, as the sector is still facing high costs and limited applications.
Predictions for 2024
Markets
Equities:
Modest Returns: I’m anticipating a mixed year in equities due to slower US growth and shifting inflation. Despite some support from lower interest rates, high earnings estimates and rich valuations might impact returns negatively. Key factors to keep an eye on include global geopolitical dynamics and the US presidential election.
The 60-40 Makes a Comeback: It’s finally the time to revisit the 60-40 portfolio for stability amid uncertain market conditions.
AI & Healthcare Lead the Charge: AI stays dominant, driven by Nvidia, Qualcomm/Broadcom, Adobe, and Snowflake. Healthcare also gears up for a strong 2024, thanks to lower interest rates and improved financing conditions. I’m specifically watching for M&A in biopharma and advancements in value-based care.
Market Rotation: Initially, I'll be leaning towards quality stocks and mega caps. But as the year progresses and rate cuts kick in, I'm expecting a pivot towards lagging sectors like cyclicals and small caps.
Fixed Income:
Bright Prospects for Bonds: Government and high-quality credit bonds will offer strong relative returns, especially in Canada amidst recession fears (i.e. weakening growth per capita and business sentiment).
A Preference for Short-Term Bonds: Given the volatile climate, short-term bonds appear as the safer bet until the yield curve stabilizes.
Alternatives:
Venture Capital’s New Normal: I expect a shake-up in VC with more down-rounds and recapitalizations. Tech giants like Databricks and Stripe could lead a renewed IPO window.
M&A Steps Up: I anticipate a surge in acquisitions and buyouts, focusing mainly on tech startups with a strong footing in AI and data-driven business models. However, regulatory hurdles, especially in the UK and UN, might add some complexity.
Private Credit on the Ascent: As traditional banks remain cautious, private credit will continue to fill the gap, offering attractive returns for risk-takers.
Tech
AI:
Shift to Consumer AI: The attention will pivot towards user-centric solutions in specialized fields like research, law, and design. Firms like Harvey, Glean and Ava should lead this trend.
Ethical AI Gains Ground: In the wake of legal challenges in AI (e.g., NYT’s case against OpenAI), companies like Adobe and Apple will emerge as winners by having built their models on top of licensed data.
Rise of Open-Source Models: I expect open-source models to challenge the performance of proprietary giants like GPT-4 and Anthropic.
AI Agents Go Mainstream: AI agents will evolve from demos to practical apps, performing complex tasks and integrating more seamlessly into our daily routines.
Deepfake Dilemmas: Deepfake tech will pose ethical challenges in news generation, notably during the U.S. presidential election.
Crypto:
Bitcoin and ETH's Dominance: I’m anticipating all-time highs for Bitcoin and Ethereum, driven by factors like spot ETF approvals, the bitcoin halving, institutional interest, and a weaker U.S. dollar.
SNARKs / ZK Proofs Expansion: I expect significant breakthroughs in SNARKs and zero-knowledge proofs, with broadening use cases across IoT and finance.
A New Era in Crypto UX: Innovations like passkeys and smart accounts will transform the crypto user experience, driving wider adoption.
Consumer Tech:
Creators Turn Entrepreneurs: I expect a surge in creators using platforms like TikTok Shop to venture into e-commerce, influenced by Skims, Rhode, and Chamberlain Coffee.
AI Wearables vs. Voice Tech: While voice tech might disappoint, AI-integrated wearables (e.g. smart glasses) will make significant progress. Meta and OpenAI will emerge as the dominant players.
Healthcare:
Alzheimer’s and AI’s Healthcare Revolution: I expect major AI-driven breakthroughs in Alzheimer's treatments, MedTech, and drug discovery.
GLP-1 Drugs’ Rising Influence: Drugs like Ozempic will start transforming the health landscape, reshaping obesity and dietary patterns.
Varia
Ilya Sutskever leaves OpenAI for xAI (Grok), marking a significant shift in AI leadership.
The Boston Bruins win the Stanley Cup, while the Montreal Canadiens face a tough back half of the season.
Tight race between Joe Biden and Donald Trump, with Biden edging out a win. RFK Jr. will also emerge as a significant independent contender.
I expect a major return to office, with most firms heading back for 4-5 days a week.
GTA VI’s hype will eclipse Dune Part Two, Taylor Swift's dominance, and the rise of anime live-action series.
Companies to Watch in 2024
Danaher: They're in a great spot for growth in life sciences. With a rich balance sheet and a cheap valuation, I would keep an eye on the stock.
Apple: Beyond Vision Pro's launch, it's their unrevealed AI strategy, powered by their massive data and distribution moat, that's intriguing.
Pika Labs: After securing $55M and launching a viral beta, they’re on track to dominate the AI video creation and editing landscape.
Mistral AI: Skyrocketing to a $2 billion valuation in one year, they might emerge as the main open-source contender to GPT-4.
Reddit/Peloton/Yelp/Oura/WHOOP: These companies are prime acquisition targets for tech giants looking to boost their LLM models with unique data.
Last year was quite a ride. Some hits, some misses, and lots of learning. Let's turn the page and hope for the best in the next 12 months.
Cheers,
Benjamin
As a reminder, none of the above should be considered as financial advice.