Market Commentary Quarter 4 2023

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The last quarter of 2023 was strong for markets, with both equities and bonds rallying. Although geopolitical tensions flared up in early October, markets managed to digest those worries over the quarter.

Lower than expected inflation rates, combined with some central banks indicating that they would lower interest rates in 2024, pushed bond yields down. At the same time, the US economy continued to show signs of resilience while the rest of the world displayed signs of economic slowdown.

However, there are strong indications that inflation has peaked in various regions. So, while some central banks maintained a cautious approach, signalling prolonged high interest rates, others indicated that the direction of travel is toward easing the rates.

Markets

This quarter was a particularly strong for multi-asset portfolios as both equity and fixed income assets performed positively. US equities offered a particularly strong return, one of the best since 2019, with lower yields indicating that central banks are about to pivot and move toward lower interest rates which supports equities. With stronger British currency (Sterling), US equities performed positively at 6.5%, though this was better in US dollar terms at 11.2%. Meanwhile, the FTSE 100, the MSCI Emerging Market, Asia Pacific and the Topix generated even more positive returns of 2.5%, 3.0%, 2.9% and 3.2% respectively.

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