Quarterly Market Update: Q4 2023
Welcome to Balance: Wealth Planning's Final Quarterly Market Update of 2023.
Throughout this year, our financial planners will collate important market information that occurred within each quarter, which we will then share with you.
Each quarterly update will contain a market review of the last three months, with any announcements or trends. As well as a review of our portfolios and how they have performed in the last three months. And finally, the long-term view of the financial market.
So, without further ado, please enjoy!
Introduction to our quarterly updates
Here is Lindy Kroese, one of our financial planners, introducing the final newsletter in our series of quarterly market updates for 2023.
Below we take a look in detail at the markets and what happened in Q4 in terms of the equity and bond market, sustainability and the tensions between America and China.
Market Review
Equity and bond markets concluded 2023 strong, following positive economic data in November that indicated inflation was declining across developed markets, and the economic moderation in the US and the UK was not as bad as had been feared. This was further backed by a positive decline in commodity prices, despite the ongoing conflict in the Middle East. The price of a barrel of crude oil fell to $80, thanks to an increase in US supply and OPEC+ members’ failure to adhere to production quotas.
On the sustainability front, we witnessed the COP28 meeting in Dubai take place in November & December. For the first time, all 200 nations at the COP28 agreed there needed to be a global transition away from fossil fuels. Although no timescales were specified.
US President Joe Biden met with Chinese leader Xi Jinping in November having not spoken in person for over a year. Tensions between the US and China elevated when earlier this year the US accused China of sending a spy balloon across its airspace. However, talks were generally positive between the two leaders and there were various agreements on energy transition and climate change which was seen a position step forward for the two superpowers.
Portfolio Review
Further positive economic data and softening inflation reinforced the markets hopes that the US and other developed countries can avoid a deep recession. This supported equities markets across the US and Europe. Lower bond yields and healthy corporate earnings boosted growth stocks and the tech sector in particular, outperformed value peers.
Q4 was a positive quarter for long-dated bonds following the news of both the Federal Reserve and the Bank of England holding rates at their current levels again. Long-dated bonds had underperformed their short-dated counterparts throughout 2023, as interest rates continued to rise. However, the recent rally has meant long-dated bonds will finished 2023 with a similar return as short-dated bonds, albeit with a much more volatile journey to get there. Over the long-term the portfolios continue to perform in-line with expectations. It is positive to see that after such a turbulent 2022, the portfolios (and the market in general) have recovered from their 2022 lows.
Our long-term view
The end of the calendar marked the time when most banks and investment managers start to release their outlooks for the upcoming year. With that, we often see Wall Streets Forecast for what target price they have for the S&P 500 by the end of the following year. For 2023, the price targets ranged from 3,675 to 4,500 by the major banks on Wall Street. As we concluded 2023, the S&P 500 closed on 4800, a new record price for the index. While we don’t know what the S&P 500 will do in 2024, there are some events we do know will be happening. There will be a UK general election in 2024 (although technical no later than 28th January 2025 which would mean dissolving parliament by 17th December 2024). There will also be a US general election in November 2024. While both these events will create multiple headlines within the news, and possibly some increased market volatility, retaining a well-diversified portfolio remains key to protecting your investments from these market fluctuations and headline grabbing events in 2024. It important to remember that short-term fluctuations won’t have lasting effects on long-term investments.
This will be the last of our quarterly reviews. This year we will be providing your investment updates in a new format of shorter, monthly updates on both market news and portfolio reviews.
Please note: This update is provided for information only, and you should not take any action before speaking to a Financial Planner, who will confirm what suits you. In addition, past performance is not a guarantee of future returns. Values can fall and rise – you may get back less than you have invested.
Please feel free to share it with anyone who may be interested. If you have any questions, please get in touch with your usual contact or investments@balancewealth.uk.