Year in Review notes are often separated from Year Ahead pieces, but we find it helpful to combine the two in order to get context. 2023 was a much better year for 60:40 funds as both markets mean reverted from a terrible 2022. In Bonds, the mean reversal came late, following a dramatic selloff in Q3, the compelling bond math finally brought long term investors out of cash, taking hem from oversold to if not overbought, then fair value given rates are being eased not slashed. In Equities, the dominance of the Magnificent 7 meant active investors either made money not owning them in 2022 or owning them in 2023. Few did both. This year opportunities are likely to lie elsewhere, suggesting diversification either within the US market or geographically. International markets largely traded sideways with a positive year end (Europe, UK, EM ex China) or appeared to have started new bull phases - Japan and India. China, which remains in a bear market thanks to weak sentiment and aggressive narrative management is the equivalent of buying Meta in January 2023. One for the brave, but also one to watch. Politics will play a large part in narrative management this year and thus be key to risk management.

With almost half the world voting in 2024 we see Populism upsetting the status quo from both left and right. Davos Man is facing something of an existential threat this year. Globalists have sold a false premise that the system has to be either Capitalism or Socialism, when in fact it can have both. Instead we have 'third way' Crony Capilalism/Corporatism in the West where households are excluded as Governments and Corporates are essentially being run for their own benefits. This has reached the point of over-reach and populists from both left and right are going to push back with a different interpretation of Build Back Better

If we had a blank sheet of paper and a New Year resolution to make better investments in 2024, what would we resolve? We would take out the unforced errors built into the system and achieve what Charlie Munger would term an advantage, not by being brilliant, but by consistently 'not being stupid'. That means weighting portfolios by conviction on return not market capitalisation, recognising that volatility and benchmark 'tracking error' are not good measures of risk to the underlying investor but create perverse incentives for managers of other people's money. It also means taking out the emotional element of investing by building systems to eliminate behavioural biases that will enable us to take better decisions.

Media Commentators don't want to hear what Trump is saying, watch his rallies or talk about his likely policies. But the markets are starting to pay attention.

The traders unofficial year end at Thanksgiving produced a lot of mean reversion including powerful short squeezes in Equities and bonds and even if they have run out of momentum they have catalysed cash to move into Equities and bonds, focussing the mind of Asset Allocators on the challenges for 2024, first and foremost being that they need to generate real returns and beat cash rather than simply hug it.