Looking back at 2023

2023 has been a welcoming year for the world of investments, particular for equities.

Strong 2023 for the US

The S&P 500 index is up more than 20% this year, erasing almost all the losses from 2022. What started as a rally mainly with the big tech stocks early in the first half of the year has broadened to companies in other sectors of the economy by the end of 2023.

Bond prices have bottomed out and is turning around after 3 years of decline. Inflation in the US appears to be finally under control and the US Fed is signaling the end of its rate hikes. This means more good news in 2024.

Malaysia Holding Steady in 2023

In Malaysia, while the KLCI is flat for the whole year, there have been pockets of gains in property and construction stocks. However it’s difficult to tell if these gains are real or speculative because the companies’ earnings are generally still below pre-Covid times. It’s never a good idea for me to chase after rising stocks when I do not understand the reasons.

I think the EPF results for 2023 should also be better than 2022. For 2022, it had declared a dividend rate of 5.35% for conventional accounts and 4.75% for Shariah accounts. I’m hopeful that a dividend of around 6% for conventional accounts would be declared for 2023.

The ringgit however did not fare well in 2023. It had dropped over 5% against the USD. Malaysians earning investments outside of the country in US dollars would have mitigated against the weakening ringgit.

What’s in store in 2024?

With the US Fed expected to begin cutting their rates in 2024, things should continue to augur well for both US stocks and bonds. As the interest rates begin to fall company valuations will rise in response and borrowings will become more accessible to everyone.

For Malaysia, things will likely improve or at least stay the same. The current Anwar Ibrahim government has proven to be relatively stable despite being a forced coalition of previously warring political parties. The fate of its economy is tied to the US and China and while the situation is improving for the US, the reverse is true in China.