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Market Analysis Dec 2023
Jan 11th, 2024
Market Analysis Dec 2023
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Analysis by Morgan Dexter
The last quarter experienced robust performance in global stocks and bonds, spurred by the US Federal Reserve's indication of potential interest rate cuts in 2024. Developed markets outperformed emerging ones, with China's real estate issues and a drop in oil prices despite production cuts.
US markets, including the S&P 500, saw notable gains, buoyed by a decrease in annual inflation and a downward revision in Q3 economic growth. This hinted at the Fed potentially ending its rate hiking and considering cuts in 2024. Sectors like information technology and real estate flourished, while energy lagged.
Eurozone stocks also rose, with a 7.8% increase in the MSCI EMU index, driven by lower inflation and stable interest rates. Real estate and IT led the gains, while healthcare and energy fell behind.
In the UK, smaller domestic stocks outdid larger ones as inflation dropped and Q3 GDP declined. Chancellor Hunt announced significant fiscal measures, including expanded capital expenditure allowances.
Japan's market grew by 2.0% in the TOPIX Total Return index, overcoming concerns about US rates and global tensions. Strong corporate earnings and signs of policy normalization from the Bank of Japan were key factors.
Asia ex-Japan equities also advanced, mainly due to eased worries over US interest rates, with Taiwan, South Korea, and India showing significant growth in tech sectors. However, China faced challenges.
Emerging markets were generally strong, led by gains in Poland, Peru, Egypt, and Mexico. Brazil and Taiwan advanced due to economic changes, while China and Turkey faced setbacks.
Fixed income markets experienced their best quarter in over 20 years, with falling government bond yields and a rally in corporate bonds. The Swedish krona topped the FX market, and convertible bonds benefited from equity gains.
The S&P GSCI Index declined due to losses in energy and agriculture, despite gains in metals. Digital assets, including Bitcoin, Ethereum, and altcoins like Solana and Avalanche, saw substantial growth.