Equity Market Structure Compendium

2023 Market Metrics & Looking to 2024 with Our Market Structure Survey

Executive Summary

Equity markets in 2023 can be summed up by the Fed and then the 10-year Treasury rate. Inflation, rising rates, recession, regional bank turmoil, debt ceiling debate, and a U.S. sovereign debt downgrade by a ratings agency. Markets started the year wondering when the Fed would be finished raising rates, celebrating the first pause back at the June FOMC meeting. Then markets shifted to estimating the timing and number of rate cuts. After digesting all of these factors, markets finished the year up 24.7%, from the start of January to the end of December.

While that increase may sound impressive, seven stocks drove the performance of the S&P 500 in 2023. These stocks – Apple, Microsoft, Nvidia, Amazon, Tesla, Alphabet, and Meta – represented almost 30% of the index and have traded as technology plays, despite being classified differently. Technology stocks in general have benefitted from the artificial intelligence (AI) enthusiasm, and many technology companies have undergone cost cutting and other efforts to drive efficiencies. If you look at the equal-weighted version of the index, the SPW, markets were flat for most of the year, even turning negative with the peaking 10-year Treasury rate.

Later in the summer and fall is when the 10-year Treasury rate came into play. In early August, the 10-year moved above 4% and continued to climb. By October, the 10-year reached almost 5%. As the rate spiked, the S&P 500 troughed, dropping to 4,117.37 in October. Then the 10-year settled back down – ending the year at 3.866%, +22.5% from the trough (now around 4.153%). The S&P 500 turned around and climbed back up, ending the year up around 15.8% from the October trough.

On the issuance side, we continued to experience uncertainty – wars, the economy, etc. – and the environment kept changing. Capital markets weathered through, with ebbs and flows across asset classes – corporate debt may go down while equity capital markets go up, with trading activity occurring regardless of the environment. Markets remained active – deals and trading – even as some capital markets businesses remained off of the 2021 highs. Traditional security valuations remained high, based on future trends like artificial intelligence (AI). However, we passed the peak of unexplainable intrinsic valuations in areas like NFTs and crypto.

Like traders and investors, corporations continue to attempt to estimate the end state for rates, both terminal level and number and timing of rate cuts. And let us not forget that we are still trying to assess whether next year will bring a soft or no landing for the US economy. As such, in 2023, equity issuance rebounded from the prior year but remained subdued to historical levels: total equity issuance $139.1 billion (+39.9% Y/Y) and IPOs $20.1 billion (+135.5% Y/Y).

Markets continued to soldier through the Fed, the 10-year, and the other macroeconomic factors. As we move into 2024, we should get more clarity on the go forward state of the economy, the cost of credit, and the discount rate for stock valuations. This should give corporations and investors the data to push forward, with the S&P 500 already breaking 5,000.

Report Highlights

Market Metrics (2023 average, Y/Y change)

  • Markets: S&P 500 4,283.73, +4.5%; DJIA 34,121.54, +3.7%; Nasdaq 12,970.28, +6.0%; Russell 2000 1,838.22, -2.5%
  • Volatility: VIX 16.85, -34.3%
  • Volumes: Equity ADV 11.0B shares, -7.1%; ETF ADV 2.3B shares, -13.8%; options ADV 43.4M contracts, +7.1%
  • Capital Formation: total (ex-SPACs) $139.1B, +39.9%; secondaries $107.2B, +36.5%; preferreds $11.8B, -4.7%; IPOs $20.1B, +135.5%; SPACs $3.8B, -70.8%

Market Structure Survey

  • Volatility & Volumes estimates: VIX 15-20 (49.0% of responses); Equity ADV 10-15B shares (87.8% of responses); options ADV 40-50M contracts (61.7% of responses)
  • Markets estimates: Grow at a moderate pace (51.1% of responses); upside risks = monetary policy, U.S. election, inflation; downside risks = geopolitical, U.S. election, monetary policy
  • Retail Investor participation estimates: Equities 20-30% (75.0% of responses); options 20-30% (58.1% of responses)


Katie Kolchin, CFA
Director of Research