The year in review and expectations for 2024

Last year (2023) was good for most investors as markets worldwide recovered from a truly awful 2022. Most investment markets delivered some growth despite rising interest rates around the world, and investors ended the year with some optimism that the worst of inflation is behind us so that interest rates might decline in 2024.

The table below shows how markets around the world performed in 2023. It is worth highlighting that although the JSE delivered some growth, it lagged other emerging markets and is now very cheap!

I think global bonds still have a way to go before investors are repaid for the horrible losses in 2022. If interest rates start to decline, we should see the prices of bonds rise, which should deliver a better return than 4% over the next 12 months.

To provide some context for how bad 2022 was. In the USA:

It was the third worst year for a balanced 60% equity/40% bond portfolio. It was the worst year ever for the USA Bond Market. The Nasdaq 100 fell 33% in 2022. The 55% recovery in the Nasdaq in 2023 was a relief, but investors have only made 4% over the last two years. I think some tech shares are now mightily expensive, so it would not make sense to invest all your money in tech; diversification is still your best method of ensuring long-term capital growth.

What to expect from 2024?

It is important to note that more than 2 billion people around the world will be voting in national elections (including South Africans), and the results in many of these elections are unpredictable. That means we can expect market volatility until the elections are decided, and investors have absorbed the implications of these results. In South Africa, the election might deliver South Africa’s first real coalition government in the democratic era – the format of this coalition could prove critical.

In addition, the energy crisis should start to wane through the year as more private power is generated. I am not convinced that Eskom will deliver a much-improved performance. Still, I am hopeful that the private sector will plug the gap. This brings me to National Health Insurance (NHI). There is no doubt that universal healthcare is urgently needed in South Africa. We all want our families, colleagues and friends to access proper medical care. Medical aid costs are increasing rapidly and will become increasingly unaffordable for all South Africans. That means the system needs to change. However, we have all seen that the SA Government has a track record of poor service delivery, and creating a new bureaucracy to take control of all healthcare in South Africa fills most of us with dread. Let’s hope a reworked version of NHI can be delivered where the public and private sectors can work together.

Should interest rates decline worldwide, it will likely provide a significant tailwind to shares, bonds and property investments. The best course of action for investors is to remain invested in low-cost, highly diversified investments.

Written by Warren Ingram

CFP®, Wealth Manager, public speaker, and author. Host of the Honest Money podcast. FPI South Africa Financial Planner of the Year 2011.