The end of the calendar year witnessed a strong uptick in financial markets, with both bonds and equities, the main investment components, seeing gains not witnessed all year. This was reflected in all TAM client portfolios with annual gains of 5-8% depending on risk profile. It's not uncommon for financial markets to rise over the festive period, and such rises are affectionately referred to as the "Santa rally". 2023 was no different, and in fact, was the strongest on record, ignoring the present weak state of the global economy. Markets often pre-empt the possibility of better times, so maybe, just maybe, solid investment returns are ahead of us.
The positivity in markets extended, and was perhaps even exacerbated, in sustainability-focused assets. Companies determined in providing a positive impact, usually small and mid-sized companies who are providing solutions to various environmental and social challenges, returned particularly strongly. One such beneficiary was the energy transition sector, which has seen particular volatility in the last three years. This is where one would find investments in wind and solar supply chains, electric vehicle manufacturers and those increasing energy efficiency. This sector saw a strong rally on the back of interest rate expectations quelling amid supportive language at COP 28. This was a stark reminder for investors to the increasingly large tailwind that is building behind these investments, with the TAM Sustainable World portfolios a beneficiary of this strength in November and December.
Artificial Intelligence (AI) was certainly a buzz word for 2023, and indeed created a buzz for those invested in the Magnificent 7 AI tech stocks. Alas, looking forward, we must admit that with almost all transformational industries and technologies, there are market bumps along the way - periods of stock price exuberance based far more on hype than fundamentals. We see 2023 as the year in which AI was firmly put on the map, and short, sharp rallies in a small number of stocks is entirely expected and importantly is a rational response to the advent of this groundbreaking advance in human achievement. However, we remain of the view that AI as a ‘tool’ to be monetised within everyday life has yet to take off. We see hundreds of companies and thus hundreds of investments still on the launchpad of AI adoption and monetisation. Therefore, we see 2024 as having the potential to see the AI trade move away from those early innovators and instead focus on those early companies presenting real evidence of adopting the innovation into their business models and revenue streams. In that respect, the AI revolution as an investable theme is still in its infancy. So, for those who didn’t pile into 2023’s hot new trend, fear not, you are not alone and there are plenty more opportunities to come.
If you would like to speak with us about these TAM Bites, or to discuss our discretionary investment management services in general, please get in touch with our UK Business Development Manager today.