The November rally was extended in December, taking the major stock indices to their highest levels since early 2022. The recovery in financial markets is mainly attributable to central bank communications and macro data. Central bankers seem to be satisfied with the level of normalisation of economic activity and the very fast return of inflation, especially in Europe, and are placing more emphasis on financial conditions. In recent weeks, macroeconomic data have started to signal a slowdown in economic demand on the consumption and manufacturing, includind in the United States. Markets, as usual, have anticipated the cycle of interest rate cuts in both Europe and the United States: they are essentially betting against the higher-for-longer paradigm by taking comfort from weak inflationary data.
As mentioned above, the rebound of the stock markets brought the major stock indices close to all-time highs. In the United States, the SP 500 index approached its high of 4800, closing the year at 4769, marking a +3.80% for the month. The Nasdaq technology index also performed similarly, up 4.90% for the period. The European Euro Stoxx 50 index also did well, +2.30% and the SMI +2.30%. The Asian market contrasted, with Hang Seng registering +1.30% for the month, flat Nikkei +0.10% while the negative Chinese CSI 300 index -1.50% on which the difficulties of the Chinese economy are still weighing.
2024 is expected to be a complex year in many respects, but not without investment opportunities. As in previous years, one will need to be able to handle the various challenges that will arise rationally and calmly. What we expect is that there will be a general slowdown in the economy. During the course of the year, the major central banks, in order to cope with potentially worse consequences of the slowdown, should start cutting rates, hence the opportunity to invest liquidity in good quality bond issues at attractive yields. Geopolitics will remain the focus of attention, with all the political responses from the various actors involved, and this may generate volatility especially in the equity markets. 2024 will also be an election year for the US, with outcomes and candidates still uncertain. We remain confident that due to these factors, the approach to investment choices for 2024 will require substantial doses of dynamism and selectivity, always implementing a careful risk analysis so as to be able to mitigate any sudden changes in market direction.