The first month of 2024 is behind us and we are now marching well into 2024 a year of presidential elections, the Olympics and much anticipated rate cuts… how many rate cuts if any is the big question on investors’ minds.
| 1m | 3m | 6m | 1yr | 2yr (p.a.) | 3yr (p.a.) | 5yr (p.a.) | |
| Australian Shares | 1.19% | 13.99% | 5.79% | 7.09% | 9.62% | 9.56% | 9.71% |
| Australian Listed Property | 1.21% | 25.07% | 10.05% | 9.48% | 2.20% | 7.79% | 5.42% |
| US Shares (USD) | 1.59% | 15.54% | 5.59% | 18.86% | 3.59% | 9.27% | 12.37% |
| World Shares (Hedged) | 1.77% | 14.23% | 4.96% | 16.54% | 3.38% | 8.21% | 10.47% |
The anticipation for rate cuts has sent global equities soaring over the last 3 months from there late October low, with majority of global indices since breaching all-time highs. The out performance of the US market has continued and so has the outperformance of the “Magnificent 7” (Tesla the only outlier). As the chart below outlines, Majority of the S&P 500’s return is due to the strength of the magnificent 7 and not due to broader overall market strength. Only time will tell if the broader market will play catch up which will add even more strength to the market or will the Mag’ 7 come back down to Earth.
Lithium, lithium, lithium, quite the start to 2024 for the battery sector and specifically lithium seeing big names such as MIN, PLS & IGO continuing their negative trend from 2023 seeing drawdowns of -15.21%, -10.06% & -16.31% Respectively. The Sector closed the month strong however, as intramonth drawdowns were -25-30%. The Sector has seen quite the rerating as analysts have been predicting supply side surplus along with demand showing signs of slowing and the uptake of EV’s potentially not occurring as quick as many investors first anticipated.
The Chinese and Hong Kong stock markets joined the lithium sector and too, have had a horrendous & volatile start to 2024. Poor economic outlook and a long-lasting property bubble burst has seen consistent selling pressure on the broader market which accelerated in the first month of 2024 with several “limit down” trading days prompting the Chinese government to step in with investment backing, maintaining low interest rates and yet to be announced but much anticipated stimulus. some have even compared the current China property burst to that in the US of 2008. The market has rallied significantly in recent days on the expectation that the CCP will do what it can to turn the market & economy around.
In previous write ups we brought to you attention the Seasonality for 2023 and how it had played out almost exactly as history would suggest and the expected trajectory for the last few months of the year which again the market followed near perfectly. Looking into 2024 which is a significant year being a US presidential election year and a polarising US election at that. The below illustrates the seasonality of 4 year cycle with 2023 included and then looks closer into the seasonality of 2024. Seasonality suggest the market to be Choppy until around the EOFY before seeing the market rally into the back half of the year. Is this likely to play out? The old saying goes “history doesn’t repeat itself, but it often rhymes”.
As the month continues, we will see many ASX listed companies continue to report earnings which will give us good insights into the state of the economy, along with this, the US CPI is expected in a couple of days, this will have a significant impact on the markets future rate outlook and the tone of the FED around rate cuts.
