As the year began, with inflation raging and interest rates rising, experts declared that recession was imminent. Investors were licking their wounds from a disastrous 2022, and it was hard to see how 2023 would be much better.

The much-anticipated recession didn’t arrive, however, and the market powered through the gloom. In the year’s final trading days, the Standard & Poor’s 500 index was flirting with a record high and had delivered a return of nearly 25%.

“As usual, the financial markets do their best to humiliate as many people as possible,” said Norman Conley, chief investment officer at JAG Capital Management in Ladue. “Very few people had positive expectations for the year, but here we are.”

What did the experts miss? Perhaps they didn’t appreciate how much government stimulus continues to flow into the economy, or how resilient consumers could be after refinancing their mortgages and other debt at ultra-low rates in 2020 and 2021.

Perhaps they just overestimated the negative effects of higher interest rates. Scott Colbert, chief economist at Commerce Trust Co., notes that rates remain lower than they were, on average, in the 1990s and early 2000s. “We have lived with much higher rates for much longer,” he said.

Joe Terril, founder of Terril & Co. in Sunset Hills, never believed the doomsayers. “When you put in as much money as the government did, it’s pretty hard to slow that train,” he said. “It’s going to continue to carry the economy.”

The stock market’s rise was powered largely by a handful of stocks that pundits began calling the “magnificent seven.” Amazon, Alphabet, Apple, Meta Platforms, Microsoft, Nvidia and Tesla accounted for more than three-fifths of the S&P 500’s gain for the year.

That invites comparisons to the dot-com bubble of the late 1990s, when technology stocks far outpaced everything else, but Ken Crawford believes this episode is different.

“The leaders this time are multibillion-, even trillion-dollar corporations generating significant amounts of cash flow,” said Crawford, senior portfolio manager at Argent Capital Management in Clayton. “They have the financial wherewithal to do well in any environment.”

The seven leaders could all benefit from advances in artificial intelligence, Conley said, and “it’s hard not to own them if you’re a long-term investor.”

Terril, though, isn’t on the bandwagon. “The S&P 493 are reasonably priced,” he said. “Those seven are not reasonably priced.”

For investors who are giddy about this year’s gains, a little perspective is in order. The broad stock indexes have roughly broken even since late 2021, with this year’s rally making up for last year’s rout. If your portfolio is equally divided between stocks and bonds, you’re still in the red: This year’s small gain in bonds didn’t recoup last year’s double-digit loss.

Still, a smart investor looks forward, not backward, and some signs point to a good year ahead. Analysts are predicting double-digit corporate earnings growth, according to FactSet, and the Federal Reserve recently indicated that it might be cutting rates, rather than raising them, by the end of 2024.

“I’m more optimistic for diversified investors,” Conley said. “You now have a fixed income piece that’s earning a decent yield cushion, and it’s probably better for the economy to be in a more normal interest rate environment.”

Just don’t put too much faith in any expert pronouncement, whether it’s about interest rates or earnings or the “magnificent seven.” Remember, today’s credible-sounding forecast could land someone on next year’s list of fools created by the market.