Markets had a strong quarter to close out 2023 with a year of double-digit returns, recovering the losses incurred in 2022. The inflation, interest rate and recession risks that had previously been spooking investors began to unwind and we saw evidence that economies were holding up better than once feared. After momentarily eclipsing 5% in late October, the US 10-year government bond yield fell below 4% by the end of the year, in a clear signal that the market believes interest rate hikes are over which is positive for risk assets like shares in 2024.

A key theme in 2023 was the rise of the “magnificent seven”, a group of US tech stocks comprising Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla. These 7 companies at one point collectively accounted for the entire return of the S&P 500, meaning that the other 493 companies were flat and the magnificent seven were doing the heavy lifting to pick up the entire index return. This level of concentration in returns was unprecedented and somewhat normalised in the December quarter. Going forward, it is uncertain whether this level of dominance is sustainable or whether the recent normalisation is a sign of things to come in 2024.

As we wrote about during the year on our website, the healthcare sector underwent a period of transformation this year that may be felt for some time. The swift ascension of glucagon-like-peptide (GLP-1) drugs for weight loss impacted the outlook for other healthcare companies and any company with an observable obesity linkage was sold off. One of the most impacted was ResMed (ASX: RMD). ResMed’s share price fell by close to 40% in the initial sell-off but has since recovered 20% from the lows as the market is starting to believe the impact of GLP-1’s on ResMed will not be as drastic as once anticipated.

2023 was yet another reminder about the importance of remaining invested and staying the course. Coming out of 2022 there would have been a number of reasons not to be invested and yet the market generated another year of double-digit returns. We continue to believe that by investing in a diversified portfolio of high-quality assets, we will be able to help our clients grow and protect their wealth over time.

As we enter 2024, the market’s confidence in the conclusion of interest rate hikes sets the stage for a promising year ahead, however it is important to emphasise that we are certainly not yet out of the woods. Despite the strong start to the year, we continue to manage our client’s capital with a strong degree of caution. We are constantly on the lookout for unforeseen risks and will seek to make adjustments to our client’s portfolios accordingly.