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Market Statistics

Challenging Two Years For Stocks, the Narratives, and the Rise of AI

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Despite the hype in the financial mainstream and social media, the US stock market had its worst two-year period in 78 years when considering years with gains and the two-year performance.  Artificial intelligence is causing a regime change.

Although stocks, especially the technology sector, had large gains in 2023, their two-year performance is the worst in the last 78 years when considering only up years. We start with the NASDAQ-100 index, and we look at the years with positive performance and the two-year performance.


A 54.5% gain for 2023 is ranked fourth highest since the index’s inception, but the two-year gain is the lowest at 3.5%. Next, we look at the S&P 500 with yearly data since 1945. The table ranks the results by the worst two-year return when a year has a positive performance. We only show the 10 first rows.


A 24.6% gain for 2023 is ranked the fourteenth highest since 1945, but the two-year gain is the lowest at 0.4%.

Although stocks gained this year, and especially tech stocks had a strong rebound, the last two years, 2022–2023, have been challenging for stocks in the last 78 years.

The Narratives

The low performance in the last two years for stocks despite the gains this year is the driver behind soft-landing narratives and the calls for a large number of rate cuts next year, although the inflation fight is not over yet, as several Fed officials constantly remind us. The finance industry is under a lot of stress due to the equity market’s performance in the last two years, and the narrative creation has accelerated to convince investors to increase their allocation to equities.

The AI Challenge

Artificial intelligence is infiltrating the finance field quickly, and layoffs will probably accelerate. In the future, the benchmark for human portfolio managers’ performance will probably be the performance of artificial intelligence. Those who will be able to beat artificial intelligence will survive in the field. Given the accelerated production of academic papers that artificial intelligence can scan and use, it will be hard for human portfolio managers to keep up. Those who have an edge will try to guard it until academics uncover it, publish it, and feed it for free to context-hungry artificial intelligence.

There is a major regime change in the finance field due to artificial intelligence, but also an increasing geopolitical uncertainty due to a struggle to secure resources that will have ramifications for the capital markets’ performance.

Disclaimer: No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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