So here it is Merry Christmas, everyones having fun, look to the future now it’s only just begun

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We often labour the point of what sort of economic news is good news for stocks. Bad economic news can sometimes be well-received as it encourages the view that central bankers are more likely to be supportive of monetary policy, and good economic news can sometimes have the opposite effect. At present, as we enter the year’s end, any news feels supportive for stocks as the S&P 500 climbs ever closer to previous record highs. All three central bank meetings this week, the Fed, the ECB, and the BofE, left rates unchanged, as expected; all tried to paint a hawkish tone, and all the market wanted to hear was you are done raising rates, the next move is down. The Fed “dot plot” of the expected path for interest rates next year is now for three cuts. Three members of the Bank of England rate-setting committee actually voted to raise again yesterday. The pain trade for stocks was higher in early November, and so it continues to be proven.

The outlook for most strategists now appears to be a positive one for 2024, falling interest rates, reasonable economic growth, and inflation rates that continue to decline. Unlike last year when the cry was for recession, own bonds forget stocks until at least the second half of the year, this time we enter 2024 in a positive mood. Even though many sentiment indicators are starting to make this multi-week bull run in equities look stretched, it’s hard to see, beyond some external event what knocks stocks off course into the year’s end as investors definitely have their rose-tinted glasses polished.

As we look back over the year, bond investors will be licking their wounds, but have managed to recover some of the losses from earlier in the year, at one point in 2023 one of the worst in history for bond investors. Large-cap growth, tech mainly, investors have had a very good year,  mid and small-cap investors had a miserable time until early Nov, and from then it’s been one-way traffic. Those who believe in the power of Bitcoin, have had their belief reinvigorated in 2023. Gold bugs have done quite well, despite rising interest rates which should take the shine off. Commodity markets have struggled in general, probably partly as the Chinese economy struggles. Oil speculators may well have expected the increasing geopolitical risk in the Middle East and as yet no real sign of a solution to the Russia-Ukraine conflict would have provided greater support for the black gold. Those large-cap UK investors have once again had a difficult year, with the FTSE 100 finishing the year in a small positive territory. Many active fund managers, unless largely exposed to the Magnificent 7, will have struggled to keep track of the headline move in the S&P 500 as AI has dominated performance. At this point, I am reminded of the Christmas song from Slade.