Global Markets

 

Global asset classes broadly rallied in the fourth quarter of 2023. Growth stocks led the way, returning 13.4%, while value stocks also gained 9.5%. Real estate investment trusts (REITs) and small-cap stocks, which underperformed in the first half of the year, rebounded 15.6% and 12.6%, respectively, on expectations of a 2024 Fed rate cut. Developed market equities overall rose 11.5%, with the S&P 500 gaining 11.7%, the MSCI Europe ex-UK index up 6.7%, and the FTSE 100 rising 3.2%. Risk appetites recovered, and investors increased their demand for risky assets. 

 

Global bonds returned 8.1% in the fourth quarter, with sovereign bond prices rising 8.0% and global investment-grade corporate bonds up 8.8%.

As of 29 December 2023:

UK 10 Year Gilt Yield 3.54%
US 10 Year Treasury Yield 3.88%
Germany 10 Year Bund Yield 2.01%

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UK Market

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Bank of England's Monetary Policy Committee (MPC) voted 6-3 to keep the Base Rate at 5.25% at its meeting on 13 December 2023. Three members voted to raise the rate to 5.5%. The MPC's November 2023 Monetary Policy Report forecasts that the Base Rate will remain close to 5.25% until the third quarter of 2024, then gradually decline to 4.25% by the end of 2026. GDP is expected to be broadly flat over this period, reflecting relatively weak supply. CPI inflation is expected to fall back to 2% by the end of 2025 and remains below target thereafter. The Committee continued to judge that the risks to its model inflation projection were skewed to the upside, such that the mean projection for CPI inflation was 2.2% and 1.9% at the two and three-year horizons. 

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Ark Insights

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Global economic recovery in 2023 was challenged by high inflation and geopolitical tensions. Looking ahead to 2024, Ark will focus on three major investment themes:

 

Pharmaceutical developments

 

As the global population ages and medical technology advances, demand for healthcare will continue to grow. Large pharmaceutical companies have strong research and development capabilities which have the potential to provide investors with long-term stable returns. In recent years, large pharmaceutical companies such as Novo Nordisk and Eli Lilly have made significant progress in the development of innovative medicines, and several high-barrier specialty pharmaceutical products have emerged. These products have high market demand and prices, which can bring considerable revenue and profits to the companies. According to market research and consulting firm TechNavio, the global specialty pharmaceutical market is expected to grow by over $300 billion from 2022 to 2027, with a compound annual growth rate of 12.59%. The factors driving this growth include the increasing number of chronic disease patients due to the global ageing population trend; new development opportunities brought by medical technology progress; and increasingly stringent regulatory requirements, which further encourage large pharmaceutical companies to invest in research and development.

 

Energy transition

 

The world is actively promoting energy transition to address the challenges of climate change and energy security, which will continue to provide huge growth opportunities for the renewable energy industry. Battery storage is an critical part of the energy transition, which can help solve the volatility problem of renewable energy and promote the large-scale application of renewable energy. Photovoltaics, wind power, and hydrogen energy firms will also benefit under such investment theme. With technological progress and policy support, their costs will continue to decline and their competitiveness will strengthen. According to the International Energy Agency (IEA), the additional renewable energy generation in Europe will double from 2022 to 2027, driven by climate action ambitions and concerns about energy security.

 

Defensive assets

 

In an environment of global geopolitical tensions, more investors may seek defensive assets to hedge against risk. Traditional safe-haven assets such as gold and yen have high liquidity and preservation functions, which tend to remain stable or rise during global economic turmoil. According to JPMorgan, gold is expected to see a breakthrough rally in the middle of 2024, with a potential peak of $2,300 per ounce if the Fed cuts rates as expected.

 

Investment Scam Warning
 

Recently, we received feedback from our investment management clients that they have received unsolicited messages from unknown numbers claiming to be our investment manager recommending high-risk investment projects. After investigation, we found that these messages contain fake investment projects that are not related to our company. 

 

We would like to remind our clients again that we will not contact you through any unfamiliar channels. Please do not trust investment projects recommended to you by strangers, disclose your personal financial information, or transfer money to strangers. Before making any investment decision, please carefully review the investment information. If you have any questions, please contact your client manager or our official channels immediately for verification.

 

As always, our Investor Relations team would be more than happy to help you with any queries.

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The views expressed in this update are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument. The views reflect the views of Ark Investment Management at the date of this document and, whilst the opinions stated are honestly held, they are not guaranteed and should not be relied upon and may be subject to change without notice. Investments entail risks. Past performance is not necessarily a guide to future performance. There is no guarantee that you will recover the amount of your original investment. The information contained in this update does not constitute investment advice and should not be used as the basis of any investment decision. Any references to specific securities or indices are included for the purposes of illustration only and should not be construed as a recommendation to either buy or sell these securities or invest in a particular sector. If you are in any doubt, please speak to us or your financial adviser as appropriate.

Issued by Ark Investment Management Ltd which is authorised and regulated by the Financial Conduct Authority. 

© Ark Investment Management Ltd. Registered in England & Wales with the company number 09281759.