It was another challenging year as one war continued with no apparent outcome (Russia-Ukraine) and another broke out in the Middle East. Many countries are trying to curb rising inflation, some with more success than others.
With 2023 just a few hours away, it is interesting to compare the performance of the world's largest stock market indices: gold, which typically performs better in uncertain times, and Bitcoin – an asset that has been declared dead several times in the past , but still growing back.
How have traditional assets performed in 2023?
Starting with perhaps the most famous US stock market index – the Standard and Poor's 500. It tracks the performance of the 500 largest companies listed on stock exchanges in the US and is usually considered a benchmark indicating the health of the country's financial state, at least in terms of Large corporations.
It started the year at just over 3,820 points and quickly rose to 4,200 points before returning to its starting position in March. In the following months, the bulls accelerated and the index jumped to 4,600 at the end of July. After another retracement, the S&P 500 finished the year strong, ending the final trading day of 2023 on December 29 at 4,769 – near its all-time high.
In percentage terms, the S&P 500 ended 2023 with a notable gain of around 25%. While that seems pretty impressive, it's easy to see that most of the gains came from a few tech-related companies, such as Nvidia (245%).
Taking into account the technology stocks mentioned above, it is logical that the Nasdaq Composite, which primarily tracks such assets, has risen the most of the indices. In fact, the Nasdaq has outperformed almost all of its peers with a 44.5% annual gain, taking it from 10,386 at the start of 2023 to 15,011 at the end.
The Dow Jones Industrial Average, on the other hand, avoids technology-related stocks. The index, which tracks just 30 major U.S. giants, is up 13.74% in 2023 – from 33,136 to 37,689.
What about gold?
The yellow metal is considered the best-known safe haven, tending to outperform riskier stocks in turbulent times. The last few years have actually fallen into such a category, which has affected gold's performance and led to uncharacteristic volatility.
An ounce of gold cost $1,813 on financial markets at the beginning of 2023. Like most assets, gold bullion experienced a strong rally, rising above $2,000 in April and May. After the summer, the trend reversed and the precious metal plummeted to its 2023 starting price in early October.
However, after the Hamas-Israel war broke out, the price of gold experienced an upswing. Its price against the dollar exploded by over $300 in less than two months, hitting an all-time high of $2,150 an ounce on December 5th.
Since then, the precious metal has lost some traction, but still ended 2023 above $2,060, up 13.73% annually.
XAUUSD annually (2023). Source: TradingView
And then there is Bitcoin
Bitcoin, like the rest of the crypto market, had a disastrous 2022 due to industry collapses and adverse global events. So it started 2023 at around $16,600. It didn't take long for the asset to break its nosedive in late 2022. By January 13, the price had risen to over $20,000 and hasn't looked back since, despite a few dips along the way.
Then came the conquest of the $30,000 mark, which was more difficult than expected. In fact, it took BTC several attempts to finally overcome this level, which it finally achieved at the end of October.
Bitcoin continued to rise in the following weeks, culminating in a price surge to nearly $45,000 in early December. It has lost some ground since then, and while there are still a few hours left in 2023, it is safe to assume that BTC will end the year in a range between $42,000 and $43,000 unless something catastrophic happens.
Therefore, Bitcoin's year-to-date gains will be somewhere between 150% and 160%. This means that cryptocurrency will outperform all of the other major traditional financial assets mentioned above by a wide margin.
With the upcoming halving (which usually serves as a catalyst for a bull market) and the possible approval of a spot BTC ETF in the US, 2024 has all the makings of being an even better year for Bitcoin. Still, it is worth noting that such an approval could serve as a selling point and history is not an indication of future price movements.
BTCUSD chart 2023. Source: TradingView
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