Alexander Grace Chartered Financial Planner

Newsletter Article

In the last three years the world has been hit by the most challenging events we have seen since the end of World War Two. As you would expect, markets have fallen and investors’ anxiety has increased. As we approach the end of 2023, the mood for 2024 is certainly more optimistic, after the turmoil of the last three years, markets are showing signs of recovery. Monetary “tightening” by central banks is easing and economic indicators in the US and Asia remain largely positive. However, the uneven and weaker than expected recovery in China emphasises that not all markets are moving forward in unison.

The US economy remains resilient with more positive measures than most other developed countries. The strong labour market, falling inflation and optimism in the housing sector are all boosting the economic outlook. However, we remain wary of high valuations in other US sectors.

Here, in the UK, inflation reduced from 6.7% in the year to the end of September to 4.6% to the end of October and to 3.9% at the end of November. The Bank of England had forecast an annual inflation rate of 4.5% by the end of the year with further falls in 2024. With inflation coming under control and with the Bank of England Base Rate at 5.25% we are unlikely to see any further rate increases.

Gilts and Bonds are now showing signs of ending their worst run since records began and many commentators see scope for a significant upside here.

Goldman Sachs have confirmed that they expect the global economy to outperform expectations in 2024. Their forecast is based on Economist’s prediction of strong global growth amid cooling inflation and robust job markets. They forecast in 2024, like 2023, that growth in the US will outpace most other developed markets.

So, what does this mean for our Alexander Grace portfolios?

Historically, equities and bonds tend to perform relatively well after a “final” rate increase. Typically, they perform better than cash in the 6/12 months following, particularly if a recession is avoided in the process.

Our Investment Committee continue to actively engage with the fund managers, that we employ in the portfolios, to ensure that they deliver the returns expected of them. This helps to embed value in our long-term investment strategy.

Please be assured that we care about you and your money and we look forward to harmonising the portfolios with more positive market sentiment in 2024.