By Craig McAvinue – 1 April, 2024
“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price”
March was a positive month across the board with most developed markets making it a hat trick of monthly gains, notably the S&P 500 and Nikkei…
Data table is from Google Finance
Currency markets were benign with an unusual scenario where both GBP & EUR ended the month where they started…less than 1% movements in in other currencies..
Data table is from Google Finance
With the first quarter of 2024 over, the bull market of 2023 continues running .The S&P posted its best first quarter for five years and twelfth best since 1945.
Lots has been made of the Magnificent Seven and their sheer size and how this impacts the overall market performance. This is true but it’s not as simple as grouping these industry giants as one.
So far this year not all of the M7 have been in positive territory, Apple is down 11% for the year and Tesla is down 29%. This illustrates the importance of using skilled managers who have a better chance of investing in the companies who go up rather than down.
But some of these businesses’ growth does indeed impact the overall market return due to their market capitalisation and large gains.
Nvidia is up 88%, Meta up 40%, Microsoft up 13% and Alphabet up 9% for the year to date. It’s no coincidence that these four companies are also the largest operators in the Artificial Intelligence (“AI”) space.
AI is very much a hot topic at the moment. There’s no denying that this technology has potential to be a game changer for many industries as it makes business operations more efficient, ultimately increasing their productivity and saving on costs.
The gains being made by the likes of Nvidia who are at the forefront of this sector are astonishing though we always have to be aware of market over reactions. AI enthusiasm is certainly in abundance right now, but is there a danger that there is over enthusiasm with Nvidia and Meta in particular with their stock prices up 223% and 128% respectively in the last 12 months.
One sector which certainly benefits from AI is the healthcare sector. Improving diagnostic accuracy, personalising treatment, predicting health outcomes, accelerating drug discovery, expanding access to care, enhancing surgical precision, streamlining administrative tasks and advancing medical research are all advances that can be made to improve in this sector.
The healthcare sector still ranks as the third best performing since 2009 as illustrated below. Though performance has fluctuated, finishing top in 2018, 2nd in 2013 & 2015 but yet bottom in 2016 and 2010 and second from bottom in 2019. This despite being inherently less volatile than technology and energy..
Sector investing is important but also choosing the right managers in these sectors makes a difference also
Investments seen as market hedges such as gold and bitcoin continue to reach all time highs, moving against traditionally expected patterns of being non-market correlated.
Geography is another factor to consider and just because one part of the world is doing well does not necessarily mean all are. As mentioned above, the US and Japan have had stellar starts to 2024, with terrific quarter one performances.
A deeper dive shows Turkey and Italy would have been two countries that out performed them. But things were not rosy everywhere. My home country of Thailand was the worst performing market in Q1.
The Investment landscape can be complex . Sectors performing differently with some up and others down. Even when sectors are doing well , not every share in that sector will
But in the long term adapting a simple strategy of using good managers who buy good companies at a fair price works
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