2023 Personal Finance Events and Trends

 

On December 12, I presented the ninth annual (2023) Personal Finance Year in Review webinar for OneOp, an online professional development resource for military family service providers. Below is a summary of ten key events and trends from the past year that were discussed:

Inflation Rate- The year-to-year inflation measure, the consumer price index (CPI), was 6.4% in January 2023 and 3.2% in November. Thus, inflation has eased but still remains elevated.

 

Interest Rates- From March 2022 to July 2023, the Federal Reserve raised interest rates 11 times to a 5.25%-5.5% range. At its last three 2023 meetings, there were rate hike pauses. High interest rates impacted home mortgages, car loans, and annual percentage rates on credit cards.

 

Credit Cards-Total outstanding credit card debt topped $1 trillion for the first time ever in Q2 of 2023 and the share of Americans revolving a credit card balance increased to a record 51%.

 

Student Loans- Student loan interest resumed on 9/1/23 and payments resumed in October after a 43-month pandemic pause, effectively acting like a pay cut to pinch household budgets.

 

Housing- 30-year fixed mortgage rates reached 7.49% (October) and have slowly fallen since then. There was a “golden handcuff” housing market with few existing homes for sale. Owners did not want to lose low-rate mortgages. Also, increased interest in ARMs and assumable loans.

 

Banking- The FDIC stepped in to protect Silicon Valley Bank depositors and 11 large U.S. banks rescued First Republic Bank. Small and mid-size banks lost market share and online bank savings accounts and CDs and money market accounts were paying 4.5%-5% by year-end.

 

Investments- There was an inverted yield curve where short-term debt returns exceeded long-term debt and renewed interest in bonds as interest rates reached historic levels. Money market fund yields hit their highest level since 2007 and Treasury yields rose to decade-plus highs.

 

Stocks- There was volatility (up and down) during the first 10 months of 2023, followed by one of the best Novembers on record that extended into December. The DJIA index was 33136.37 on 1/3/23, reached record highs in mid-December, and closed at 37656.52 on 12/27/23. Also, the share of Americans owning stock directly/indirectly (58%) reached its highest point ever.

 

Shopping- Subscription service (e.g., streaming, satellite radio) cancellations surpassed new orders and “premiumization” (higher cost tier products and services) flourished. Also, buy now, pay later (BNPL) was increasingly used for basic necessities and BNPL standards tightened.

 

Car-Buying- By Q3 of 2023, the average new car loan interest rate was 7.4% (highest since 2007) and the average car payment was $736 per month, a record high. Only one new car was available for under $20,000 and 1 in 6 car buyers committed to a monthly payment of $1,000+.

 

To learn more, review this list of references about 2023 research studies, trends and events.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.