A Happy New Year to one and all.
Hopefully, the so-called Santa rally across investment markets restored some much-needed financial optimism with the value of both bonds and equities rising strongly. The start of 2024 has dampened some of the enthusiasm, but this isn’t surprising having experienced such a strong rally.
We don’t expect a regression back to where we were in October as we have moved into the next stage of the economic cycle. The direction of travel for inflation and interest rates is creating less angst than there was, although there is still a narrative around this, but the focus is now switching towards a lower growth environment. Weaker earnings (profits) are a continued concern.
Unlike in recent years, bonds are back in the ring as a desirable investment asset which should serve to lower volatility compared to last year, as well as delivering positive returns.
Mortgage rates are falling as are saving rates, reinforcing our message throughout last year that whilst cash looked attractive in the short-term, one has to be mindful of the opportunity cost of missing out on a strong market bounce, particularly regarding bonds. UK gilts for example have risen in value by 7.82% in just over a couple of months (from 28th October 2023 until 4th January 2024).
Well done to everyone who kept their nerve and who remained invested and to those who invested cash when the market fell in September and October. We deployed our cash within our Future World Portfolio at the end of October and pleasingly caught the recovery. It’s not too late to move cash into the market though, as the end of the interest rate cycle beckons and opportunities open up.
This week, the agenda is as follows:
- LGT Wealth Management’s views
- Mortgage rate war
- Are the markets being too optimistic?
- Opportunities further afield
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Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.