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With the year drawing to a close the time has come to reflect on the stock market’s performance over the past 12 months.
In this article we’re going to explore which sectors have performed well this year and how major UK indices have fared compared to the rest of the world. Plus, we’ll take a look at some lessons investors may have learnt in 2023.
Scroll down for all of the details, or click on a link to head straight to a specific section…
2023 has been a mixed bag for the stock market. On one hand, we’ve seen the value of the so-called ‘Magnificent Seven’ soar in 2023, with tech stocks enjoying an almighty bull run in 2023. In contrast, healthcare is one sector that has performed very poorly in 2023 with investors seemingly turning away from defensive stocks.
So, from tech to healthcare, let’s take a closer look at how various sectors have performed this year…
If you’re looking for an example of an unstoppable bull run then look no further than the tech industry in 2023.
Ongoing excitement surrounding artificial intelligence coupled with increasing investor confidence in the sphere has led to many tech stocks enjoying double-digit gains over the past 12 months.
All of the usual tech culprits – Apple, Amazon, Alphabet, NVIDIA, Meta, Microsoft, and Tesla (a.k.a the ‘Magnificent 7’) – have seen their share prices skyrocket this year. And if you were brave enough to have invested in any of these big-names at the start of the year, it’s possible you’ve more than doubled your initial investment.
AI chip-maker NVIDIA, for example, has seen it share price surge 242% since the turn of the year. Meta’s price, meanwhile, has risen 170%.
Of course, whether tech’s current bull run will continue far into 2024 is anyone’s guess. What we do know, however, is that that the tech sector’s volatile nature isn’t for the faint of heart. In 2022, the same Magnificent 7 delivered a 39% loss for investors – proof that the sun doesn’t always shine for Elon Musk, Mark Zuckerberg, and co.
As the global pandemic is now *touch wood* behind us, some may say it’s not surprising to see the likes of Moderna (down 51% year-to-date), Pfizer (-48%), AstraZeneca (-11.6%) falling by the wayside this year.
After all, it’s easy to see how some investors may have got carried away with the industry’s potential during the midst of the Covid-19 crisis.
Yet our fading memories of the pandemic probably isn’t the only reason why healthcare stocks have suffered this year. According to some analysts, the healthcare industry has struggled this year because it’s considered a ‘defensive asset.’ And because the global economy has shown a degree of resilience in 2023, investors have seemingly turned away from defensive assets this year in favour of riskier investments.
Speaking of the pandemics… 2020 and 2021 were understandably torrid years for the airline industry. Yet make no mistake about it, 2023 has been the year when the sector has bounced back with a bang.
Dublin-based Ryanair, for example, is up 75% since 1 January, easyJet is up 51%, while Wizz Air Holdings has risen 5%.
British Airways’ owner, International Consolidated Airlines Grp, has soared 24% in 2023 while over in the states, American Airlines stock has risen 13% and United Airlines is up 17%.
These returns compare very well to to pretty much any other sector you can think of in 2023. But will the airline industry continue to fly high into 2024? We’ll have to wait and see…
Another interesting sector to study this year are the major UK supermarkets.
Given the cost of living crisis, exacerbated by seemingly never-ending inflation, it’s fair to say that grocery retailers have taken a fair bit of flack over the past 12 months for raising their prices.
Despite this criticism however, there’s no doubt that the industry has had a year to remember. Tesco’s stock has risen 24% in 2023, J Sainsbury plc is up 30%, while Marks and Spencer Group is up a gigantic 106%. Meanwhile, grocery technology company, Ocado, has seen its stock climb 11% since the turn of the year.
Given the cost of living crisis is unlikely to go away any time soon, it’d take a brave soul to bet against supermarkets having a similarly successful 2024.
Now we’ve highlighted the performances of some interesting sectors this year, here’s a look at how various stock market indices have fared in 2023, starting with the UK’s biggest blue-chip index…
Despite an encouraging start to the year, the FTSE 100 is up just 0.29% since the beginning of 2023.
Given we’ve seen soaring inflation this year, plus rising rates on savings accounts, FTSE 100 investors will no doubt be frustrated by the indexes’ misery return this year – though, on the bright side, at least it probably won’t end the year in the red.
The FTSE 250 has also experienced a ‘meh’ year in 2023. The index, consisting of the 101st to the 350th largest companies on the London Stock Exchange, is up just 0.39% in 2023.
While UK-based indexes have struggled this year, it’s been a slightly different story across the pond…
The tech-dominated S&P 500, for instance, is up 23% – though perhaps this isn’t too surprising when you take into account tech’s extraordinary bull run over the past few months.
One of the three major US indexes, the Nasdaq Composite is up a massive 42% this year.
While it’s been a roaring year for the index, however, its current price remains roughly 8% below its all time high of November 2021.
The oldest index in the US, the Dow Jones Industrial Average is up an impressive, if not extraordinary, 12.5% this year.
Across the continent, Germany’s DAX 30 blue-chip index is up 19% this year, while France’s equivalent CAC 40 has risen 15%.
Now we’ve explored how various sectors and indexes have fared this year, what lessons can investors take from the stock market in 2023?
Here are three that we’ve put together…
Studying the performance of individual sectors over the past 12 months does show that, sometimes, putting all your ages in one basket can pay off spectacularly!
Yet, as we’ve said it numerous times at Money Magpie, diversification should always be the name of the game when it comes to investing.
While investors holding an FTSE 100 tracker fund with a handful of Government bonds may be frustrated at their returns this year, it’s important to take into the account the bigger picture when it comes to diversification.
Remember, while a portfolio consisting of a wide mixture of assets is unlikely to deliver extraordinary returns, it’s also the case that investors who are well-diversified have a lower chance of suffering huge falls when a sector or industry takes a big turn for the worse.
UK-based indices have massively underperformed this year compared to their overseas counterparts.
Whether this is down to investors’ attitudes towards the health of UK-economy, the Government, or even the Bank of England, it’s clear to see that the UK is struggling right now.
Of course, there are two ways to look at this…
Some investors may conclude that the UK is on downward spiral, meaning the FTSE 100 and 250 are likely to be in for more of the same in 2024, and beyond.
On the flipside of the coin, other investors may believe UK stocks are undervalued, and therefore may be tempted to pile their capital into British stocks in order to invest in them ‘on the cheap.’
12 months ago, no-one could have told you with absolute certainty that 2023 would be the year that the tech industry would enter a seemingly unstoppable bull run. Likewise, nobody could have predicted that both the FTSE 100 and 250 would have performed as equally sluggish as one another.
And on a similar note, nobody could have accurately predicted just how badly UK stocks would have performed compared to their American and European cousins.
When it comes to investing keep in mind that even the experts get it wrong.
Remember, hindsight (and hindsight bias) can be a wonderful thing, so never assume you can predict the market. This is why, rather than try to second-guess sectors, or industries, that are likely to perform well over the next 12 months, it’s almost certainly a better idea to take a long-term view and ensure you’ve exposure to a wide range of assets.
If you’re investing for the first time, do take a look at our article that explains how to invest in stocks.
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