MAGWITCH OFFSHORE 2024 PREDICTIONS

As we come towards the end of the year, we often see predictions being made about what will happen in the new year.  These predictions take place across all aspects of human lives.  Which sports team will win the league / cup?  Who is going to win the upcoming general election (as next year we see many countries go to the polls)? Even is this the year that someone is finally going to pass matric.  Predicting the future is a key part of creating strategies however predictions are often fraught with the danger of getting things wrong. 

Each year Bloomberg conducts a poll amongst market strategists.  These are the very people at the world’s largest banks who are paid and skilled enough to think about what is going to happen in the future.  The simple poll that Bloomberg conducts asks one question – “where do you think the S&P500 will finish at the end of next year”.  2023 was indeed an interesting year as it was the first time in decades that the Wall Street strategists saw a down for the S&P500.

The more than two decades of predictions in the chart are interesting in that the strategists had always been positive about the fact that the market will end the year up. This is the same period that has included a number of market crashes such as the one caused by the Coronavirus pandemic and the sub-prime induced Great Financial Crisis. Further we have seen sovereign debt crises in Europe and across Emerging Markets yet each year the market strategists expected the S&P500 to end higher.

This would further indicate that there has never been so much pessimism as there was at the end of last year. Cast your mind back 12 months to the environment that we were in. The US Federal Reserve were battling to fight against inflation and were conducting a series of interest rate hikes in order to bring inflation under control. These interest rate hikes were causing bond yields to spike and asset values to drop. Was the opinion of these strategists that the interest rate hikes were going to go on indefinitely or more likely that the bottom was about to fall out of the US economy?

Anyway, as we look back at 2023 in hindsight, we saw over 20% total return from the S&P500 with the tech heavy Nasdaq 100 giving you just short of 50%. As a collective poll the market strategists totally got it wrong – and this was a poll where they were just asked one question.

Now imagine being the active manager that is trying to individually predict the fortunes of a portfolio full of individual stocks. Sure, you may get some predictions right, but what is the consequence of those that you get wrong.

At Magwitch Offshore we believe in a couple of investment fundamentals. Firstly that equity markets will provide your best investment returns over the long term however will never do so in a straight line. The volatility of the stock market is not for everyone and one needs to achieve the best return based on one’s appetite for risk. Finally, our second belief is that diversification remains the one free lunch in the market. Certainly not every company within an ETF is going to have a stellar year, but missing a prediction will not place the entire investment return at risk.

Magwitch Offshore is a leading provider of Global Balanced ETF portfolios with products in all major currencies. Magwitch utilises an advisor distribution model and their portfolios are available through offshore endowment structures provided by some of the larger Insurers.