December General Markets Comments
“Muy tranquilo” – Gramatik, 2010.
2023 has come to an end, “Muy Tranquilo” in December with, nevertheless, many interesting moves in key markets (more on that below). But the whole year was far from “Muy Tranquilo”: apart from the insatiable thirst from equity investors towards the famous Magnificent Seven, there has been several significant ups and downs for a lot of financial assets.
Let’s start with the most important one, US 10 year yield: it ironically ended 2023 more or less where it started (3.85%), but went as low as 3.25% and as high as 5.01%. That’s a 176 bps amplitude, more than 45% of the starting point! What about Oil, ranging from $65 to $95 for the WTI, or the Japanese Yen, down 16% at some point versus the dollar, falling to a 32 years low, or the Chinese CSI 300 equity index, up 10% in January to end the year 12% down. This list could expand further, but it is clear that inflation expectations, and consequently monetary policies, are one of the main reasons for these wild moves.
A more dovish, or less hawkish, Fed, pulled the trigger for a spectacular year-end rally: all major indices, barring the Japanese Topix (as usual struggling when the USD is weak), were on the rise. The S&P 500 added 4.4%, the Stoxx 600 3.8%, the MSCI Emerging Markets 3.7%, and the high-flying Nasdaq 100 5.5%. In a falling interest rates environment, the MSCI World Value surprisingly outpaced the MSCI World Growth (+5.2% versus +4.4%), while Oil, despite tensions in the Red Sea, abandoned 5.7%.
Interestingly, we have witnessed several All-Time Highs in December: the Dow Jones, the DAX, the CAC, the S&P 500 total return, the Nasdaq 100 total return, the Itraxx Crossover and Gold. Also worth mentioning is the Topix, which reached levels unseen since 1990!
Do not expect a “Muy Tranquilo” 2024: we will have to cope with high valuations for the market leaders, an economic slowdown (or a recession?), a difficult to tame inflation (favourable base effects are behind), continuous geopolitical tensions, which, added to the looming US presidential election, will maintain a heightened fear factor. But we nevertheless wish you a wonderful 2024, as “Muy Tranquilo” as possible!
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