Performance Update – January 2024

15 January 2024

Markets began January with a recheck, given how markets rallied in the last few months of 2023. We take a look at why predictions are counterproductive and how 2024 will bring nearly half of the world population to the ballot boxes

 

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Dear *|FNAME|*

A Christmas hangover

After a strong finish to the previous year, the markets began to pull back in the first week of January as optimism about potential U.S. rate cuts started to fade. The anticipation that the Federal Reserve would begin reducing rates as soon as March seems overly optimistic to me. Considering the continued high employment levels in the U.S., I believe rate reductions are more likely to occur around mid-year.

The situation in the UK is somewhat different and the expectation of rate cuts is for the first half of this year as inflation seems to be falling quite quickly. Those of us looking to renew mortgage rates soon (including myself) might experience a slight decrease from the peak rates of 2023. This is a favourable scenario for borrowers, but it may not be as advantageous for savers.

This data is net of fund charges but does not include potential platform costs or advisor charges which are likely to alter the overall returns set out above.

2024 – What we know

As we often state at the start of each year, attempting to forecast short-term market movements is unwise. While we do make minor adjustments to allocations as necessary, predicting which asset or region will yield the highest returns is a risky endeavor.

What is certain, though, is that 2024 stands as a record-breaking year for elections. More than 40% of the global population will head to the polls during the year, aspiring to enact significant changes in their lives.
Expect unexpected results that could introduce volatility, not only in local markets but also, in certain instances, these election outcomes could impact the worldwide economic landscape. This is particularly true for the recent election in Taiwan. Taiwanese voters have elected Lai Ching-te from the Democratic Progressive Party (DPP) as president on Saturday, challenging China’s influence efforts. Despite China’s ongoing objective of “reunification” with Taiwan, the DPP, which advocates for Taiwan’s independence and opposes Chinese territorial claims, aimed for an unprecedented third consecutive term in Taiwan’s current electoral system.

From China’s perspective, this election result is likely viewed with concern. The election of a DPP candidate, especially one advocating for Taiwan’s separate identity, could be seen as a setback to China’s reunification goals. China might interpret the DPP’s loss of parliamentary majority as a sign of internal division and potential opportunity, but Lai’s presidency still poses a challenge to China’s strategic interests in the region. The election outcome may prompt China to reassess its approach towards Taiwan and its strategies in the broader geopolitical landscape.

This election outcome is expected to heighten tensions between China and the US, serving as a prime illustration of how elections can impact confidence. However, for investors, such developments are often considered mere “noise.” We will likely hear plenty of rhetoric from both the US and China regarding this weekend’s results, but given the significant challenges each country faces this year, neither is expected to escalate matters further.

Our views

Stay invested!

The past 2 years have seen an increase in conflict in every corner of the globe and the sharpest rise in interest rates in the western world since the 70’s. Although 2022 was disappointing, 2023 offered some hope!

I have spoken before about an environment this year which we believe is likely to be favourable for fixed income and equities as we move to more stability with inflation and rates. We will remain selective, but most importantly well diversified!

We hope you’ve had a great start to the year and as always we are here to answer any of your questions.

Warm Regards

Louis Greening
Investment Specialist

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