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Global Equity Growth Portfolio: December 2023

Global equity returns continued to be positive in December with the FTSE All World Index (USD) climbing 4.8%. Inflation fell faster than expected in several western economies. This has heightened expectations for rapid cuts to central banks’ interest rates during 2024. Mid-month the Federal Reserve’s own policy projections indicated substantial rate cuts to come. With the global Index now just 4% below the all-time end of 2021 high, the fears of “higher for longer” that surrounded the market sell off in the summer seem long forgotten.

The equity market rally has been relatively narrow and dominated by a small handful of technology companies. These firms generally continue to enjoy increasing growth forecasts. Such growth is becoming increasingly tricky to find.

One area of the global equity market that has been left behind generally is China. The knock-on impacts of the property sector bust on the domestic economy are relatively well understood. What international investors continue to struggle with, is the gauntlet of regulations and a changing operating environment for companies. A further unanticipated change occurred during December when the country introduced more stringent rules for online gaming companies. While Tencent spokesman indicated they are well positioned to manage the new rules, the violent share price reaction to the news indicated concerns of the investment community. As we wrote last time multiples are generally low in the country and international investors are generally very underweight in the region. Both, historically, change rapidly once confidence returns.

Trading activity

Trading activity was limited with some reductions in weightings to the energy sector, Adobe and a top-up in AMD and the S&P ETF. A new position was established in Crowdstrike in line with the fund.

During the month, the Ashburton Global Equity Growth Model Portfolio (USD) returned +6.4%. The best performing stocks held were Enphase (+30.8%), Align (+28.2%) and AMD (+21.7%). While the worst were Tencent (-10.2%), Patterson (-7.8%) and Vermilion (-3.6%).

2024 will be another huge year for geopolitics, with a record number of elections being held globally. Inflation remains among the most important variables for investors to watch given it tends to drive the central bank decision makers who raise or lower global liquidity levels, which affect investment markets. We continue to look for reasonably priced quality companies who are compounding their intrinsic value and offering above market growth rates.