Happy New Year!
I promised a look back on 2023 and some pointers on what to look out for in 2024, with just a smattering of predictions for the coming year. Let’s do it!
2023
I spotted that the FT ran a headline on December 31st along the lines of 2023 being the best year for markets since 2019. As 2020 was something of a special year due to the pandemic and the end of 2021 was the collapse of the long, fantasy driven, free money, bull market, that is not a hugely inspiring claim. 2022 saw the realization that fixed income stocks and growth equity discounts had been based on a wildly optimistic bet that interest rates would stay low for ever, so was an equally gloomy year (but one that many had seen coming).
2023 was in fact at the start very much a continuation of 2022, with an expected recovery in fixed income (bond) valuations deferred longer than many (including me) anticipated as central banks dramatized their heroic role in battling inflation with ‘higher for longer’ interest rates. It was only in late October that markets collectively decided not to believe that rates were going to stay up much longer and a new, and I think permanent, upward trend in valuations commenced.
If interest rates were the main driver of 2023 markets as a whole, then a whole raft of economic problems in China, or more exactly the very negative perception of Western investors about China as a place to invest, meant that a place where you would have wanted to lower your asset mix exposure in 2023 was China and by implication, many Asia Pacific and Emerging Market funds where the managers were still sticking to heavy fund weightings in the main China and Hong Kong stock markets.
A place where I thought investors ought to be confident bumping up their asset allocations was the unloved UK. Some funds with careful stock picking have already offered very solid returns from portfolios of mostly UK shares and I think this is just the start of a new phase when global money flows into UK companies with secure profits and ridiculously low P/E ratios. A recovery in technology shares was kicked off by almost irrational enthusiasm for everything you could stick an AI badge on.
So we have arrived, for better or worse as always at the start of a new year.
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