I write this article in the quiet period between Christmas and New Year, a chance for us all to consider what might influence our decisions as we head into 2024.
In the short term, there has been only limited UK data to contend with. Economic growth remains elusive, with gross domestic product (GDP) now estimated to have fallen by 0.1% in the third quarter of the year and whilst a recession has so far been avoided, there can be no guarantee that this will continue to be the case. It also seems possible that weak sentiment may continue to reduce the consumer’s willingness to spend, piling further pressure on retailers.
Despite some recent research that suggested investors put nine times more cash to work in money market funds than into equities last year, 2023 proved a good one for stock market returns and the FTSE100 ended in positive territory. Its improvement will be a fraction of that seen in the US however, where it truly was the year of the ‘Magnificent Seven’.
Apple, Microsoft, Google, Amazon, Nvidia, Tesla, and Meta averaged a gain of approximately 75% in 2023 versus a gain of only 12% or so from the remaining 493 businesses in the S&P 500 index. These seven companies alone now have a higher weighting in the MSCI World Index than all of the stocks in the UK, China, France and Japan combined. Investors will of course need to decide whether similar share price returns can be generated over the next 12 months.
With inflation becoming less of a talking point, perhaps the focus now returns to how corporate earnings hold up in face of continuing low levels of global economic growth, and also how markets cope with the uncertainty surrounding elections in both the UK and the US. One thing’s for certain, there should be plenty to talk about.
Please note that the value of investments and the income from them can go down as well as up and you may not receive back all the money invested. Past performance is not a reliable indicator of future results. Any views expressed are those of the author.