Share markets have continued to perform strongly during the first quarter of 2024 as inflation continued to soften in Australia and abroad. The ASX finished another Earnings Season throughout February too which provided some colour on who the winners and losers were in 2023.
Safe to say that 2023 was the year that defied the bears as the bulls took the bit between the teeth and smashed through the back gate! International Shares were the best performing exposure in 2023 returning 25.1% and Global Real Estate the worst at -3.6% p.a. Australian Shares on average returned an impressive 12.42% including dividends in 2023.
So far this year Australian Shares have returned 5.33% across the three months to April, reflecting the confidence all and sundry had that Central Bank rate cuts were ‘imminent’. As we begin April however, more commentators have begun to signal a vast reduction in likely overall interest rate cuts in 2024 because some pockets of inflation remain high. As the fervour around the cuts has subsided, more experts have cautioned that rate cuts may not happen during 2024 at all! Agreement now seems to land somewhere around one rate cut here in Australia but possibly more in the US. Nonetheless balancing the ongoing threat of sticky inflation, a weaker consumer – now that households are saving less money than they were during the GFC due to rising cost of living and home loan payments – and governments (both here in Australia and globally) who are motivated to spend their budgets on ‘nation-building projects’ to stimulate their economies, will be no easy task for Australian and global Central Bankers when deciding how many rate cuts are required. With employment figures strong and the ongoing threat of big spending governments (‘Hello, election year!’) it might be reasonable to expect that RBA Governor Bullock extends her ‘wait-and-see’ approach resulting in less rate cuts than expected at the beginning of 2024. Any rate cut of course will come as welcome news to many of us and our families.
Nevertheless, at Wakefield Partners, our long-term investment philosophy and strategy mandates us to look for opportunity where we see it and we think there will be opportunities to purchase high quality companies on the ASX at fair, perhaps discounted, prices for our clients in 2024. We recognise that like us our clients will continue to see, read, and hear much ‘noise’ about the upcoming US Presidential Elections later in 2024, but importantly note that history shows us that markets typically respond similarly no matter whether a Democrat (Joe Biden) or Republican (Donald Trump) is elected. Historically the US stock market performs well in the final year of US Presidencies and softens somewhat in the first year of the new President.
Speak to one of our advisers today to discuss how your investments can best navigate the year ahead!
