After a tumultuous 2022 calendar year, 2023 turned out to be an excellent calendar year for global equity markets, with the MSCI All Countries World Index rising by 22.2% in USD terms. This is despite the 2022-2023 period delivering the sharpest interest rate hiking cycle in three decades, causing the mini-banking crisis in March 2023 and leading to the failure of three small to mid-sized regional U.S. banks (Silicon Valley Bank, Silvergate Bank and Signature Bank). Last year, ‘’Artificial Intelligence’’ became the new buzzwords with over 30 000 mentions of AI on listed company earnings calls during the year. We also witnessed the extreme concentration of S&P500 index as the so-called ‘’Magnificent Seven’’ (Tesla, Meta, NVIDIA, Amazon, Alphabet, Microsoft, Apple) reached the same market capitalisation as the five largest stock markets outside of the U.S., but only delivering 10% of the profits of the MSCI World Index versus 27% for the five ex-U.S. stock markets (source: Orbis).

Below we have copied in asset class performance of 2023 (pink) compared to those of 2022 (grey):

Asset class total return in USD as at 31 December 2023. Past performance is not a guarantee of future results.

Source: Goldman Sachs

Below is the 31 December 2023 updated longer-term USD performance of the MSCI country indices, along with their latest fundamentals:

MSCI country index USD performance as at 31 December 2023. Past performance is not a guarantee of future results. Source: MSCI

Notwithstanding the rally experienced in many global equity markets in 2023, looking forward, there are many markets that still look attractive based on their fundamentals. These countries are highlighted in green in the table above, and are mostly in higher risk emerging markets. The election of Argentina’s new president Javier Milei also seemed to have fueled a rally in the Argentinean equity market, delivering 65.7% for the 2023 calendar year in USD terms and still trading at a relatively attractive 8.87x price to earnings ratio.

Considering the risk involved in many of the highlighted emerging markets, the U.K. market stands out as relatively undervalued, on a risk-adjusted basis. Its forward price to earnings ratio is only 10.8x offering potential good hunting grounds for individual security selection.


The following factors are worth considering in positioning for the year ahead:

  • Higher global interest rates have resulted in global money market assets totalling roughly $5.9 trillion at the end of 2023 (a 31% increase since the Fed began its hiking cycle)
  • Goldman Sachs projects five 25 basis point U.S. Federal Reserve interest rate cuts in 2024
  • Monetary easing and expected lower interest rates may encourage flows from money market assets into equities and longer-duration fixed income as investors seek a higher yield. Multi-asset funds, such as Global Balanced Funds are set to benefit
  • The U.S. equity market (S&P500 index) remains highly concentrated with Apple making up roughly 7% of the index at the end of 2023. This makes it the largest stock in the index in over 30 years. In January 2024, Apple was surpassed by Microsoft as the largest index constituent. Active management is therefore required to steer clear of overvalued index constituents
  • The US 10-year constant maturity yield minus the US 2-year treasury constant maturity yield is still negative implying a potential economic downturn in the U.S. However, seen in context, it has become less negative since mid-December 2023, leading more investment managers to doubt that a major U.S. recession will take place in 2024
  • The U.S. unemployment rate remains low at 3.7% (long term average is 5.7%) despite the sharpest interest rate hiking cycle in three decades
  • The Biden administration’s $1 trillion infrastructure bill was signed into law with $400 billion in projects already having been announced, covering 40 000 projects that are set to be completed in the next 3-5 years. This bodes well for the return of large-scale high-value add industrial production in the U.S. The U.S. is increasingly insourcing many of its previously outsourced requirements as “Isolationism” is taking over from “Globalisation” largely due to numerous global supply chain disruptions since the Covid-crisis in 2020
  • China continued underperforming in 2023 and is now trading on a forward P/E ratio of 9x. However, China’s demographics are changing (its population pyramid is inverting with less young people to fund an increasingly older population). China is becoming less competitive globally with emerging Asia and Mexico offering cheaper, higher-skilled labour, with Mexico in particular being well positioned to cater to the labour demands of a reindustrialising U.S. economy
  • High geopolitical tensions remain, leading many global equity managers to switch out of cyclical assets (for ex. Oil drillers) to more defensive sectors of the market (for ex. Healthcare) in positioning their portfolios for the year ahead
  • Approximately half of all nations will have their national elections in 2024, including South Africa and the U.S. It seems as if the world is favouring Conservative candidates, rather than their more Liberal counterparts with an anti-migration policy being a key election promise of many Conservative candidates

Please don’t hesitate to contact us if you would like to discuss this information in more detail.

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Author: Amedi de Klerk

22 January 2024