Olivier Le Moal
In reflecting upon 2023’s performance results across asset classes, it is apparent this year posed considerable challenges for capital markets amidst the ongoing macroeconomic transition. Persistent inflationary pressures and central bank tightening created headwinds for many segments throughout the period.
While equities maintained respectable full-year gains, considerable monthly volatility was witnessed as geopolitical and economic unknowns shifted investor sentiment. Real estate, too, experienced pronounced swings in housing market sensitivity to monetary policy shifts.
Volatility was pronounced, with the VIX averaging over 25 compared to its historical norm of closer to 20. Monthly returns fluctuated widely, reflecting shifting sentiments toward growth and prices worldwide.
Fixed income faced ongoing pressures as yields rose sharply, impairing total returns. Commodities fluctuated wildly on changing demand expectations as recessionary risks waxed and waned.
Although not immune to swings, alternative strategies demonstrated the benefits of diversification in periods of enhanced uncertainty.
Looking ahead to 2024, diversification across uncorrelated assets and investment approaches seems prudent, given lingering questions around the trajectory of prices and growth.
Strategies incorporating flexibility to dynamically alter risk exposures – such as those employing futures and options – may provide portfolio advantages in navigating unknown conditions that typically accompany macroeconomic transitions.
Overall, while 2023 underscored both opportunity and risk inherent to investing across market cycles, it also highlighted the value of prudent diversification and risk management in achieving steady long-term capital appreciation. May the new year yield greater stability and prosperity for all market participants.
Past performance is not indicative of future results.
Past performance is not indicative of future results.
Sources:
Managed Futures = SocGen CTA Index
Cash = US T-Bill 13 week coupon equivalent annual rate/12, with YTD the sum of each month’s value
Bonds = Vanguard Total Bond Market ETF (BND)
Hedge Funds = IQ Hedge Multi-Strategy Tracker ETF (QAI)
Commodities = iShares S&P GSCI Commodity-Indexed Trust ETF (GSG)
Real Estate = iShares U.S. Real Estate ETF (IYR)
World Stocks = iShares MSCI ACWI ex-U.S. ETF (ACWX)
US Stocks = SPDR S&P 500 ETF (SPY)
All ETF performance data from Y Charts
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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
