Market Watch for December 2023

2023 Global Markets: A Tale of Two Halves – Local Investors Find Brighter Spots

The story of global financial markets in 2023 was one of two contrasting chapters. While the first half was marked by volatility and downward trends, the second half brought a welcome wave of optimism and positive returns.

Early Turbulence:

  • Initial excitement from China’s post-pandemic reopening faded as fears of inflation, tightening interest rates, and geopolitical conflict (Gaza, Ukraine) dominated the scene.
  • This global downturn mirrored in South Africa, with the JSE ALSI falling -1.3% by October and local bonds offering meager returns (3.2%).

Second-Half Reversal:

  • Lower inflation, stable global growth, a weaker oil price, and easing rate expectations fueled a market turnaround in developed economies.
  • South Africa benefited from these improved conditions, despite local challenges like sluggish growth, weak commodities, and power outages.
  • Local investors across various asset classes achieved above-average returns, exceeding most Reg 28 savings solutions. For example, SA MA Equity funds (Low, Medium, High) delivered impressive annual returns of 11.1%, 11.3%, and 12.3%, respectively.

Fed Pause Pushes Property & Bonds to Top:

  • The pivotal moment came in December when the US Federal Reserve unexpectedly held rates steady, surprising the market and signaling the possible end of tightening.
  • This decision fueled a surge in interest rate-sensitive assets like property and bonds, making them the year’s star performers in South Africa.
  • Property stocks and bonds delivered outstanding returns of 16.4% and 8.1% in Q4, and remained champions for the whole year with 10.8% and 9.7% returns, respectively, even outshining SA equities (9.3%).

Key Takeaways:

  • While global markets navigated a tricky first half, the second half brought welcome relief and strong returns, especially for South African investors in property and bonds.
  • Despite local challenges, South African investors found success in various asset classes, highlighting the importance of diversification.
  • The unexpected Fed pause served as a turning point, paving the way for a positive year-end outcome in many markets.

To find out more about the current market situation, read the Market Watch for December 2023 below:

Missed last month and need to catch up? Read the November market watch here.