After another volatile year, we look back on 2023 from an unexpectedly strong position, following large market rallies through much of November and December. Continued falling inflation and expectations of rate cuts throughout 2024 from the central banks bolstered market sentiment and boosted confidence. This was further supported by a turnaround of the services global Purchasing Manager Index (PMI), although this was not seen in manufacturing, which continues to reflect the difficulties in the sector and disparity with services.
In the face of the strong growth seen at the end of 2023, initially, market sentiment paled in January due to anxiety around over-confidence causing the pre-new year highs. However, by the end of the month this had reversed, seeing an overall increase in global stocks of 0.7%. Impressive performances from the US and particularly Japan - 1.8% and 4.7% respectively – came in contrast to a fall in China of 9.85% over the same period. As has been the story frequently in recent years, big tech led the way with Facebook announcing dividends for the first time and a large surge in stock price based on positive results. The US returns are very much dominated by the “magnificent seven” (Apple / Amazon / Alphabet (Google) / Meta (Facebook) / Microsoft / NVIDIA & Tesla).
Performance in the US and strengthening economic indicators has led to claims of a "goldilocks" economy. Borrowed from the fairytale, the goldilocks economy refers to a position which is not too hot and not too cold, meaning steady growth avoiding recession but not so high as to cause inflation to overshoot. This is considered the ideal position for an economic system; however, it can never be a permanent state due to economic and business cycles.
Looking ahead to March and beyond, expected interest rate cuts globally and positive outlooks both at home and abroad have created a strong base for value assets as well as growth. It would have been very easy to be disheartened with returns after a very volatile 2022 and 23, but as you can see, markets can quickly reverse. It’s always important, as we continue to emphasise, that with markets we always need to take a long-term view and we are confident that the managers we use are navigating this effectively.
If you have any questions or would like to speak about your financial plan, please don’t hesitate to contact your adviser.
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The contents of this article do not constitute financial advice in any way; if you have any concerns about your finances you should talk to your financial adviser. The value of your investments can go down as well as up.