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Slowing global growth, high inflation, and tighter monetary policies in the developed world. As the new year gets underway, our experts review the past year and consider the macroeconomic outlook for 2024.

What were the major challenges in 2023?

2023 was marked by three major trends: slowing global growth, a sharp deceleration in inflation, and tighter monetary policies from the developed countries’ central banks, foremost among them the US Federal Reserve and European Central Bank.

Equity markets

The global equity market gained around 18% in euros. The US market posted the best performance, followed by Europe and Japan. In contrast, the emerging markets disappointed, mainly due to China’s negative performance in the wake of problems in its property sector.

The US market was driven by the 'magnificent seven' (Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia and Tesla), which surged amidst the euphoria surrounding the boom in artificial intelligence. These seven companies contributed more than 65% of the S&P 500's annual performance and now account for almost 30% of the index, more concentrated than it has ever been. It is also striking to note that fewer than 30% of companies in the US market outperformed the index over this period.

The excellent performance in 2023 managed to erase the heavy correction recorded in 2022. Equity markets are now close to record highs.

Bond markets

After the severe correction in 2022, bond markets enjoyed a partial rebound in 2023. Yields eased significantly at the end of the year as inflation slowed. After hitting 5% in mid-October, the US 10-year Treasury yield dropped back sharply, ending the year slightly below 4%.

In the eurozone, its German counterpart followed a similar trajectory, ending the year just above 2%.

What's in store for 2024?

The market is anticipating significant interest rate cuts in 2024, but for the time being seems to be ignoring the possibility of a hard landing, especially in the US.

We are not ruling out the scenario of recession in the US in 2024. Signs of a slowdown on the employment front are already visible, and the consequences of a tighter monetary policy could become more evident in the coming months. In addition to geopolitical uncertainties, the US elections are another factor prompting a degree of caution, particularly after the sharp rise in equity prices in the final months of the past year.

We are maintaining a cautious stance in the equity portfolio. Our strong conviction is that company fundamentals will gradually become more important again, and we continue to favour stocks in the healthiest financial position.

The bond portfolio offers greater opportunities thanks to more attractive yields.

What’s the best investment strategy?

In the current climate, it is essential to choose an approach that prioritises quality assets and risk control.

Our experts apply an investment methodology based on selecting quality companies, purchased at a fair price. The companies they select have one or more sustainable competitive advantages, ensuring structurally high profitability.

Our investment approach relies on active management and conviction. For us, buying a share means taking a long-term stake in a top-quality company, at a price below its intrinsic value. Our asset managers look for companies with a tangible competitive advantage, offering high profitability and surplus cash flow. Companies with these characteristics are likely to create long-term value for their shareholders.

These three essential rules are now more valid than ever.

  • Stay invested. Market timing – whereby investors try to sell at a high price and go back into the market at supposedly more attractive levels – is a futile exercise that has historically destroyed value.
  • Focus on investing for the long term. Volatility is an inherent characteristic of financial markets. It diminishes as the investment horizon increases.
  • Have reasonable expectations for a return in line with your risk profile. The search for a higher return necessarily requires assuming a higher level of risk.

How can you make meaningful investments?

As a leading bank engaged in the financial market, we are always mindful of the notions of responsibility and sustainability. This means that, in addition to considering financial criteria when selecting the companies in which we invest, we take extra-financial criteria into account – specifically environmental, social and good governance factors.

Your adviser is always available to discuss your projects with you and provide information on your investments.

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