Words on Wealth: 2023: the year the recession never arrived

The year 2023 turned out far better for unit trust and exchange traded fund investors than many market commentators predicted. Picture: Independent Newspapers.

The year 2023 turned out far better for unit trust and exchange traded fund investors than many market commentators predicted. Picture: Independent Newspapers.

Published Jan 29, 2024


The year 2023 turned out far better for unit trust and exchange traded fund investors than many market commentators predicted.

The JSE All Share Total Return Index was up 9.3% for the year to December 31, according to Sanlam Investments’ Markets in Focus newsletter for December. This is a considerable improvement on the 3.6% it delivered in 2022.

According to the Corion Market Report for December, which sources its data from Morningstar, the best-performing sector was financials (up 21.8% for the year). Resources stocks fared the worst (down 15.4%) after enjoying a succession of good years – over five years to the end of December they averaged 12.5% a year. Industrials were up 17.3% for the year and listed property was up 10.1%, according to the Corion report.

South African bonds had a good year – the bond index was up 9.7% in 2023, edging past local equities, and more than double what bonds delivered in 2022 (4.3%). This came alongside a welcome drop in inflation: a year ago inflation was above 7%; it is now at 5.1% according to the December Consumer Price Inflation Index figures from Statistics South Africa (StatsSA).

And now for the juicy bit. Investors in the US stock market, and particularly the “Magnificent Seven” tech stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) had a bumper year. Corion reports that Nvidia, benefiting from the AI boom, was up more than 254% on the S&P500 Index of the top 500 US companies, its best performer in 2023. The S&P500 itself gained 24.2% in US dollars.

However, these gains need to be weighed against what happened in 2022. The S&P500 was 4 766 points on December 31, 2021. It was 3 840 points on December 31, 2022. On December 31, 2023, it was 4 769 points, the same level as two years previously. In other words, it only made in 2023 what it had lost in 2022 (-19.4%). If you had invested in December 2021, your return on the S&P500 will have been close to zero (in dollars).

South Africans investing in rands into overseas markets would have enjoyed higher returns because of the ongoing depreciation of our currency – it was 7.5% weaker against the dollar in 2023 and lost 11.3% against the euro.

The MSCI World Index, which captures the performance of nearly 1 500 companies in 23 developed countries, was up by 33% in rand terms in 2023, largely driven by those soaring US tech giants.

China was the exception in the stronger global equity markets, according to the Sanlam Investment report. “The Hang Seng Index was down 13.8% for the year due to concerns about prospects for growth, following a real estate crisis and another move by the Chinese authorities in December to curb online gaming. The Chinese property and construction sector was the worst performer, with a 30.9% decline for the year,” the report says.

Fund categories

The performance data below is from Corion Capital’s Monthly Report and Quarterly Income Report for December:

• SA Equity General: funds averaged 7.3% for the year, ranging from -6.1% to 21.3%.

• SA Multi Asset High Equity: funds averaged 12.3% for the year, ranging from 4.2% to 48.9%.

• SA Multi Asset Low Equity: funds averaged 11.0% for the year, ranging from 2.7% to 14.9%.

• Global Equity General: funds averaged 27.6% for the year, ranging from 9.9% to 96.4%.

• SA Real Estate General: fund returns ranged from 4.5% to 14.3% (no average given).

• SA Multi Asset Income: fund returns ranged from 6.2% to 13.4%.

• SA Interest Bearing Short Term: fund returns ranged from 7.0% to 11.1%.

• SA Interest Bearing Variable Term: fund returns ranged from 5.9% to 12.8%.

It’s notable that the multi-asset equity funds outperformed the pure equity funds, a turn-up for the books, giving more diversified investors reason to smile.

Where to from here?

What kept the markets on edge in 2023 was whether the higher-interest-rate environment would push the US into a recession, and whether or not inflation had been fully tamed. While these fears persist, most economists are favouring a “soft landing”. They expect that the US Federal Reserve Bank, after “keeping rates higher for longer”, will begin lowering them in 2024 on the back of lower inflation.

In a media presentation this week, recently appointed Alexforbes chief economist Mpho Molopyane said her team was cautiously optimistic about the year ahead. “In the absence of adverse shocks, it looks like central banks will be able to bring inflation back to target without crashing the global economy,” she said, while acknowledging geo-political risks and an unprecedented year for watershed elections in numerous countries, including our own.

(My view is that “adverse shocks” may be the order of the day if the Middle East crisis spirals into something more horrendous than it already is, or if certain charlatans are voted into power.)

“While uncertainty remains a central theme in 2024, a well-diversified portfolio remains essential. Our expectation of a 'soft landing', and for interest rate cuts to continue in 2025, points to a favourable backdrop for both bonds and equities,” Molopyane said.

* Hesse is the former content editor of Personal Finance