EXANTE Quarterly Macro Insights

EXANTE Quarterly Macro Insights

Q4 review

2023 ended with equities markets experiencing their best year in decades and bond yields back to roughly where they started the year. The Nasdaq-100 had its best annual performance since 1999, while the S&P 500 rose phoenix-like from lows in October to reach new records in December. Leading the charge were technology stocks which benefited from rising expectations of multiple Fed rate cuts in 2024 and the ongoing interest in AI. The S&P 500 was the best performing major equity index over the quarter delivering its best quarterly performance for three years. Returns for the full year were dominated by the ‘magnificent seven’ tech and AI stocks, which contributed around 80% of the index returns. According to Morningstar, large-growth stocks gained 47.3%, blowing away large-value stocks by 36 percentage points – the second-biggest advantage for growth in 25 years. It appears that 2023 turned out to be a good year for both stock and bond investors.

The fourth quarter of 2023 saw strong returns across the majority of asset classes. Expectations rose throughout Q4 that the Fed, ECB and BoE will cut interest rates earlier in 2024 than was previously forecast. Developed market equities delivered 11.5% total return while global aggregate bonds returned 8.1%.

Energy stocks fell during the fourth quarter of 2023, -7%. Commodities underperformed in Q4, delivering -4.6% while also being -7.9% overall in 2023. With expectations that the higher for longer mantra stressed by central banks in Q3 was coming to an end as headline inflation continued to decelerate, growth stocks returned +13.4% over the fourth quarter, with value stocks delivering +9.5%.

US indices for Q3 2023 (29 DECEMBER 2023)

S&P 500 +11.51% QTD +24.54% YTD
Nasdaq 100 +14.36% QTD +54.47% YTD
Dow Jones Industrial Average +12.54% QTD +13.77% YTD 
NYSE +9.74% QTD +10.99% YTD 

According to the Nasdaq market intelligence desk, 10 of the 11 S&P 500 sectors were in the green in 2023 with 10 also being in positive territory in Q4. The best performing sector in 2023 was Technology (+57.8%), Communications (+55.8%), whereas the defensive Utilities sector was -7.1%. It was a great year for the mega caps with Apple, Microsoft, Nvidia, Tesla, Amazon, Meta Platforms and Alphabet leading the charge of top performers, contributing, according to JPMorgan Asset Management, about 80% of the index returns.

In Q4 energy stocks were -7.0%Exxon Mobil, BP Plc, Chevron, Shell, Occidental Petroleum, Halliburton, and Baker Hughes were all down over the quarter. Marathon Petroleumended the quarter relatively flat, while Phillips 66 was up over Q4.

Basic materials stocks were +9.7% Q4 and +12.7% in 2023Yara International, Albemarle Corporation, Sibanye Stillwater and CF Industries Holdings were downin Q4. Mosaic, Newmont Mining, Freeport-McMoRan, and Nucor Corporation were all up in Q4.

European Indices:

Stoxx 600 +6.40% QTD +12.74% YTD
DAX +8.87% QTD +20.31% YTD
CAC 40 +5.72% QTD +16.52% YTD
IBEX 35 +7.15% QTD +22.76% YTD
FTSE MIB +7.47% QTD +27.94% YTD
FTSE 100 +1.65% QTD +3.78% YTD 

Global Indices:

Hang Seng -4.28%QTD -13.82% YTD
MSCI global +10.95% QTD +0.33% YTD 

Fixed Income

US Treasuries 10-year yield to 3.88%.
Germany’s 10-year yield to 2.02%.
Britain’s 10-year yield to 3.54%.

November and December saw global bond markets rise by about 10%. This was likely a result of concerns of slowing growth in China, a possible Eurozone recession and a slower growth trajectory in the US are weighing on market sentiment, renewing interest in owning debt, with traders likely to continue to bet that central bank policymakers will be looking to cut rates in 2024 to support growth. As noted by Fidelity, nominal 10-year Treasury bond yields finished 2023 in roughly the same place as the beginning of 2023. The substantial decline in real yields—the inflation-adjusted cost of borrowing—drove most of the steep Q4 drop in nominal yields. 

In Europe, Germany's 10-year yield, the benchmark for the euro zone, fell about 55 bps in 2023, the biggest drop since 2014, with almost all of the fall in November and December. This was because inflation slowed more than expected. The ECB signalled in December that its rate-hiking cycle is almost definitely over, with several policymakers suggesting that cuts may begin as early as May.

Rising expectations of central bank cuts, tightening spreads and a weakening dollar towards the latter part of Q4 supported positive returns. According to JP Morgan Asset Management, UK Gilts returned +8.6%over the quarter as the BoE maintained its policy rates. German bonds were +6.3%in Q4 while Italian bonds were +7.5% in Q4 as spreads tightened against Germany.


Oil rose in early Q4 before falling back on forecasts of increasing supply. Although global demand is expected to rise in 2024, concerns around demand growth, due to the weak growth in China and Europe’s movement toward recession, have weighed on traders. As noted by the IEA, oil market sentiment turned decidedly bearish in November and early December as non-OPEC+ supply strength coincided with slowing global oil demand growth. The extension of OPEC+ output cuts through 1Q24 did little to propup oil prices.

Gold rose in Q4 as the dollar declined and yields began to fall on rising expectations that the Fed and other major central banks will begin to cut rates in Spring 2024. Rising geopolitical risk put gold on investor radars as a safe haven, with gold reaching new records and demand from emerging market central banks helping to support gold.

The US

US equities ended the quarter significantly up. The annual inflation rate in the US continued to decelerate, falling to 3.1% in November This was a considerable drop from its 6.4% level in January 2023. The unemployment rate was 3.7% in December, the same as in November. The Fed’s preferred measure of inflation – the core personal consumption expenditure index – was softer than expected, rising 0.1% month-on-month in November. Economic growth for Q3 was revised down to an annualised rate of 4.9% from the previous reading of 5.2%. The US composite purchasing manager’s index (PMI) came in at 50.9 in December 2023, little-changed from November's 50.7. There was a marginal upturn in business activity primarily due to continued growth in the service sector. The economy appeared to be resilient in 2023 with the labour market remaining tight with 216,00 jobs added in December 2023. Wages are also still strong, coming in at +4.1% year/on/year in December 2023. In addition, the economy was supported by a mix of fiscal and liquidity measures helping to offset the drag from higher rates including the Inflation Reduction Act (IRA) and the CHIPS Act.

The Eurozone

Eurozone equities also rose in Q4 due to rising expectations that there may be no further interest rate rises and despite worries over the negative effects of interest rate rises on economic growth. Eurozone annual inflation was at 2.9% in December, up from 2.4% in November. The uptick from November was widely expected, reflecting base effects and the withdrawal of energy support measures. The pickup in headline inflation was already flagged by European Central Bank President Christine Lagarde, citing higher energy costs in 2022 that won’t be repeated. Higher interest rates weighed on the eurozone economy throughout Q3 and into Q4. Eurozone GDP fell by 0.1% quarter-on-quarter in Q3 and is likely to have fallen again in Q4 as the HCOB flash eurozone purchasing managers’ index (PMI) fell to 47.0 in December.

The UK

UK equities rose over the quarter. Although headline inflation fell to 3.9% in November, the BoE kept rates on hold again in December. Revised data from the ONS revealed UK GDP fell in Q3, having previously shown zero growth. However, the CIPS/S&P Global Composite PMI rose to 52.1 in December of 2023 from 50.7 in the previous month, pointing to a second consecutive expansion, and revised higher from the preliminary reading of 51.7. The CIPS/S&P Global Purchasing Managers' Index (PMI) for the services sector rose to 53.4 in December, showing the sector grew more strongly in December than an initial reading of 52.7 and November's 50.9. The GfK consumer confidence index rose to -22 in December 2023, up by two points from -24 in November. For 2023 overall, UK Total Retail sales increased by 3.6% from 2022, but the majority of this was due to food sales. The British Retail Consortium (BRC) said spending in cash terms in December was 1.7% higher than a year earlier, representing a fall in purchases after inflation is taken into account. There is also the concern that wage growth continues to remain high, which may impact inflation. In August to October 2023, the annual growth for regular pay (excluding bonuses) was 7.3%. Although the Bank of England’s Monetary Policy Committee (MPC) left interest rates unchanged at 5.25%, there are concerns that rising wages and potential inflation due to the increased cost of shipping that is feeding into supply chains and will hit the end consumers, could require the BoE to maintain its tight policy stance for longer.

Asia ex-Japan

In Asia ex-Japan, Chinese equities were -4.8% despite government and central bank stimulus measures. Equities markets were down as investors focused on weaker economic growth, the sufficiency of the stimulus measures by the Chinese government to spur growth, the ongoing real estate crisis and uncertainty over China’s regulatory regime. In Q4 China's manufacturing activity shrank for a third straight month in December. The official purchasing managers' index (PMI) fell to 49.0 in December from 49.4 the previous month. However, the Caixin private sector PMI indicated that manufacturing was up from 50.7 in November to 50.8 in December 2023. China’s services sector activity improved in December with the Caixin/S&P Global services PMI rising to 52.9 from 51.5 in November. This was the twelfth month in a row that the service sector output expanded and the rate of growth was the quickest recorded since July. All markets in the MSCI AC Asia ex-Japan index ended the quarter in positive territory apart from China. The MSCI Asia ex-Japan index was+6.5% according to JPMorgan Asset Management. As noted by Schroders, Taiwan, South Korea, and India were the strongest index markets in the quarter as technology stocks and chipmakers gained. Malaysia, the Philippines, and Singapore also achieved strong growth in the fourth quarter, while gains in Indonesia, Thailand, and Hong Kong were more muted.

Emerging markets

Emerging market (EM) equities were +7.9% in Q4 despite weak Chinese performance. Mounting growth concerns meant Chinese equities fell by 4.8%, but this was offset by strong returns elsewhere, particularly in Latin America, where the MSCI EM LATAM Index was +17.8% in US dollar terms over the quarter.According to data from Schroders, Poland was the top performer over the quarter as markets welcomed Donald Tusk’s election as prime minister at the head of a pro-EU liberal coalition government. Peru, Egypt and Mexico also posted strong double-digit returns and Chile posted the biggest declines.


The USD fell throughout Q4 after initially rising in October following on from the attack by Hamas on Israel. However, growing market expectations that the Fed will move towards cuts in 2024 led to USD softening. The ECB, while remaining cautious about when cuts may begin to be considered, has made it clear that the inflation target is in sight. The EUR was +4.41% in Q4. Sterling also continued to strengthen against the USD in Q4 as the Bank of England (BoE) held rates tight and gave no signs of weakening. The GBP was +4.36% in Q4.


Bitcoin +55.88% QTD +16.01% MTD +152.93% YTD
Ethereum +36.87% QTD +11.57% MTD +90.51% YTD

Bitcoin and Ethereum were bolstered in Q4 by expectations that the US Securities and Exchange Commission (SEC) would give approval for Bitcoin ETFs with a strong likelihood of Ethereum ETFs to follow. The approval would open Bitcoin to institutional and retail investors by giving them direct exposure to the coin through a regulated product, without the risks of buying from unregulated exchanges or the higher costs associated with ETFs that invest in Bitcoin futures.

Note: As of 5:00 pm EST 29 December 2023 

What to think about in Q1 2024

There are a number of continuing and new risks to investors in Q1 2024. Economic data over the fourth quarter pointed to a deterioration in the growth outlook in the Eurozone and UK. US inflation is expected to fall further in Q1 but there are concerns about wage growth in a still resilient labour market and the fact that global geopolitical risks are rising. The rerouting of shipping from the Suez to around Africa is already expected to impact supply chains and margins, with shipping costs rising which may still feed into second round effects. Oil prices are expected to fall in 2024 on strong US supply and increased production from non-OPEC members. There also remains the problem of a possible government shutdown in the US with the negative impact that would have on the economy as well as the risk it poses to the US credit rating. With the election cycle heating up in the US, this is likely to cause party political infighting and this will continue to weigh on sentiment, although it is likely to be short-lived. Many of the risks in 2024 will be geopolitical due to the high number of elections taking place globally. These elections have the potential to upset long standing alliances and add to domestic pressures which could have wider global implications. There are also continuing tensions in the Middle East and the potential impact this will have on oil prices, supply chains and the fight against inflation as the costs of shipping increase and company profit margins may be lowered. There is also the ongoing war in Ukraine which will test the continuance of US and European support.

Economic and Geopolitical Risk Calendar:

The potential policy and geopolitical risks for investors that could negatively affect corporate earnings, stock market performance, currency valuations, sovereign and corporate bond markets and cryptocurrencies include: 

January 2024

13 January 2024 Presidential election Taiwan. Incumbent Tsai Ing-wen of the Democratic Progressive Party is ineligible to seek a third term. Vice President Lai Ching-te, the presidential candidate of the ruling liberal Democratic Progressive Party (DPP), is likely to win. However, the big issue will be how the results impact the relationship between Taiwan, China and the US. In early January President Xi of China said the “reunification” of Taiwan and China was a “historical inevitability”. He added that “compatriots” on both sides of the Taiwan Strait must share in the glory of “national rejuvenation”. The US and its allies in Europe and in the ASEAN region are concerned about China’s assertiveness in disputed territories in the South China Sea and the rise in military activity around Taiwan. China claims sovereignty over Taiwan and has not ruled out using force if Taipei refuses unification indefinitely.

15-19 January 2024 World Economic Forum (WEF) Annual Meeting.The WEF Annual Summit will take place in Davos (Switzerland).

25 January ECB meeting and monetary policy decision. The ECB will remain in a bit of a standoff with investors who are expecting faster rate cuts. Although wages are rising as unemployment in the Eurozone reached a record low of 6.4% in December, slowing growth, especially in the largest Eurozone economy, Germany, may increase reluctance among policymakers to continue to maintain rates. The ECB has stressed that any easing won’t be immediate and that sufficient evidence must be shown that inflation is converging to the 2% target. 

28 January 2024 Presidential election Finland.President Sauli Niinisto is ineligible to run again. If no candidate wins in the first round, a second round will be held on 11 February.

30-31 January 2024 US Federal Reserve Monetary Policy meeting. The Fed will remain data dependent. Consumer inflation expectations are falling 3.0% from 3.4% at the one-year ahead horizon, to 2.6% from 3.0% at the three-year ahead horizon, and to 2.5% from 2.7% at the five-year ahead horizon. Demand has remained resilient and consumer confidence increased in December to 110.7, up from a downwardly revised 101.0 in November.

February 2024

1 February 2024 Bank of England Monetary Policy Summary, minutes and Monetary Policy Report.Markets will be looking to see how confident the Bank is about the direction of growth in the UK and whether the full impact of previous rate rises have filtered through.

3 February 2024 Democrat Presidential primary elections, USA. Democrats begin their contest in South Carolina, as President Joe Biden seeks re-election.

8 February 2024 Parliamentary elections, Pakistan. Pakistan’s senate passed a controversial resolution calling for a delay in general elections, but they are still likely to go ahead. Allegations of vote rigging and electoral manipulation are highly likely. Elections were originally due to be held in November, 90 days after the dissolution of the lower house of parliament in August, but were delayed to February due to the fresh demarcation of constituencies under a new census.

26-29 February 2024 World Trade Organisation Ministerial Conference. The topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements.

March 2024

1 March 2024 Legislative elections, Iran. These will be the first elections to take place since widespread protests in 2022. The existing leadership of President Ebrahim Raisi and Supreme Leader Ayatollah Ali Khamenei will come under pressure as about 30% of Iranian households are living below the poverty line while dealing with inflation at well over 30% and heavy international sanctions. Globally tensions have soared as Iranian backed rebels attack ships amid Israel’s war with Hamas.

5 March 2024Super Tuesday, USA. Approximately one-third of all delegates to the presidential nominating conventions can be won on Super Tuesday. The results are therefore a strong indicator of the likely eventual nominees from the Republicans and Democrats.

7 March 2024 ECB meeting and monetary policy decision. The focus will be on whether core inflation has come down enough that wage pressures are no longer a concern. Policymakers will also consider the delayed impact rate rises are having on the eurozone economies including on business investment.

19-20 March 2024 US Federal Reserve Monetary Policy meeting. The Fed will focus on wage growth, the degree of labour market weakening, and the continuing resiliency of the economy. 

21 March 2024 Bank of England Monetary Policy Summary and minutes. Policymakers will likely be focused on the data with a close eye on wage growth and employment numbers. 

While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.

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