In 2023, economic resilience surpassed previous pessimistic forecasts, as most asset classes experienced gains amidst decreasing inflation and robust economic expansion.

The rise of artificial intelligence (AI) emerged as a driving force behind increased earnings and equity returns, notably propelled by a select group of mega-cap stocks, dubbed the “Magnificent Seven” (comprising Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta), which bolstered the broader stock market. However, interest rate volatility remained pronounced, reaching multi-decade highs before declining sharply toward the year’s end following the Federal Reserve’s dovish pivot signalling potential rate cuts in 2024. Remarkably, the Fed adeptly managed to navigate the delicate balance of curbing inflation and moderating economic growth without triggering a recession.

Looking ahead, it is anticipated that there will be a continued easing of inflation and a deceleration in growth, yet a global recession is not to be seen on the horizon. This outlook should afford central banks the opportunity to relax financial conditions through anticipated rate cuts throughout 2024. Should this macroeconomic trajectory persist, bond returns are likely to receive broad support, while equities stand to benefit from anticipated earnings rebounds, albeit potentially hindered by valuations.

Nevertheless, investors must remain vigilant regarding potential risks in 2024. Volatility is expected to remain a prominent feature in markets, with heightened sensitivity to any negative deviations in economic data, particularly concerning inflation. Geopolitical tensions also loom large, notably amid a significant election year and escalating conflicts in the Middle East, compounded by increasing polarisation in national and international political spheres.

Recent events, such as the presidential election in Taiwan on January 13th, could impact relations with China and the West, while anticipation builds for America’s presidential election in November, overshadowed by the lingering influence of former President Trump. While the base scenario from experts suggests a favourable stance on risk, we advocate for a balanced and diversified portfolio approach. Despite year-end valuations reflecting market optimism, short-term corrections may occur; however, overall, a positive environment for multi-asset investors is anticipated in 2024.

Long-term growth estimates remain positive, and investors should try to look beyond the short-term challenges and uncertainties. While there may be near-term challenges, staying diversified can create opportunities for long-term investors.

Investing in the stock market involves enduring periods of market turbulence, which can be unsettling for investors. However, staying invested throughout a market cycle has historically yielded greater rewards over the long term. Market rebounds after significant losses have proven to be significant, which is why it’s essential to stick to a sound investment strategy. Timing the market is a daunting task, as anticipating highs and lows is challenging, and getting it wrong can lead to locking in losses and missing out on future gains.

Here to help you navigate your way to financial security.

The Milestone Advisory team are qualified financial services consultants. We specialise in helping professionals in the construction sector and related industries. Our team will work with you to review your finances, explaining your options in clear English. No jargon – just the facts.

For more information, contact Darragh Hogan.

Follow Irish building magazine on LinkedIn for the latest news and updates.