CI Associates

Global market review & outlook 2024

Market review & outlook

In the face of considerable headwinds, 2023 turned out to be a much better year for investors than expected, with nearly all asset classes producing positive returns, mostly well above inflation and better than cash, which itself delivered the best return since before the Global Financial Crisis. The MSCI World index of developed equity markets returned 23.8% in USD, Global Emerging Markets +9.8%, and Global Government Bonds +4.0%, while credit markets significantly outperformed risk-free government bonds, with US investment grade corporate bonds +8.5%, US high yield bonds +13.4%, and Emerging Market bonds +10.3%. Gold moved to an all-time high in USD terms at the end of the year, returning 13.1%, while commodities were the only notably weak area, with oil down by 10% and some key metals and agricultural commodities also down significantly

However, the gains were heavily concentrated in the final two months of the year, with nearly all equity and bond markets ending at or very close to their high for the year, and equity returns were concentrated in a narrow group of stocks. By mid to late October, most bond markets had been in negative territory for the year-to-date, global emerging equity markets were down, and, aside from the US and Japan, developed equity markets had made little or no progress.

Most asset classes end 2023 close to year high
Within equities the concentration of returns was extraordinary, driven by a small number of mega-cap tech stocks in the US. The ‘Magnificent 7’ top US tech stocks returned 75% for the year; stripping them out left the rest of the US market slightly down by late October, with the year-end rally taking the return for the year to +15% excluding the Magnificent 7, compared with the +26% return including them.
Magnificent 7 drive US equities
In contrast to the dominance of the US, China was a major disappointment, failing to participate in the year-end rally, down by 4.2% in Q4, -11.2% for the year. Over the past 3 years, China’s market has halved while the US has returned over 30%. The impact of these 2 big markets on global indices is illustrated in the performance of MSCI World ex-US and MSCI Emerging Markets ex-China, which were almost identical over the year, while inclusion of the US and China respectively leaves emerging markets underperforming developed markets by 14%.