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Month in the Markets: December 2023

A round-up of the latest month in the markets.
The text 'A month in the markets' written on a blue background
Reading time: 6 mins

The Month in a Minute

📰 Overall: December was a month of widespread optimism in the markets, with the price of bonds and shares rising sharply.

💪 Benchmark Performance: Wealthify’s December performance was ahead of industry benchmarks. Despite favouring bonds, asset selection was a key driver for our outperformance.

📈 Market Movers: US Shares (+8.9%); UK FTSE 250 (+6.7%).

📋 Plan Summary: Plans with a higher allocation to shares performed better than those with a higher allocation to bonds.

🌍 Original Plans: Shares (+4.7%) and bonds (+2.8%) both delivered healthy returns.

🌳 Ethical Plans: Shares (+6.3%) and bonds (+2.7%) both performed positively.

⏲ Going Forward: Despite a strong month, we remain cautiously positioned but confident that the opportunities weve selected will have a positive effect on Plans into 2024 (including our US bond allocation)

Positive market sentiment continued in December, as bonds and shares extended their gains. Optimism from November continued to drive markets in December, with the Federal Reserve’s (the Fed) indication of three interest rate cuts in 2024 adding to investors’ hopes that peak interest rates are behind us (with interest rate cuts potentially coming sooner than expected).

As a result of these lower interest rate expectations, bond yields (the expected returns from a bond) fell, with the 10-year Treasury yield dropping below 4% for the first time since the start of August. A decline in yields means an increase in the price of bonds.

Our diversified approach produced strong results in December, as UK midcap shares and UK longer maturity bonds led performance for shares and bonds, respectively. Meanwhile, our investments in property also delivered a strong performance.

We maintain our cautious approach of favouring bonds, believing they offer better risk-reward than shares, which remain highly priced (and, as a result, vulnerable to greater-than-expected economic decline — especially following the rally in the fourth quarter of 2023).

We also continue to believe the share market underestimates the possible negative – and delayed – impact of high interest rates on corporate earnings (something that would only strengthen bonds as a safe-haven asset).

Taking a closer look at the US, inflation data held steady at 3.1% in November, whereas the US labour market continues to provide mixed signals, leading to multiple interpretations.

2023 could be remembered as the year of ‘the recession that never came’ and, as inflation approaches 2%, the Fed will feel more compelled to cut interest rates. Meanwhile, economic growth has remained resilient, with US retail sales and consumer confidence delivering positive surprises.

There are, however, some signs of weakness in the economic data — especially in manufacturing.

Despite this, a combination of falling inflation and consumer resilience has reinforced the belief among investors that a ‘soft landing’ could be achieved (although we do we remain sceptical of this happening, as historic economic data suggest it’s a rare occurrence).

In Europe, the latest inflation data bounced back to 2.9%, as government subsidies to help consumers manage energy costs ran out. However, prices excluding energy continued to go down.

The manufacturing sector in the euro zone remains under pressure, with activity shrinking in December for an 18th straight month (and euro zone GDP expected to have dipped in the fourth quarter of 2023).

In the UK, November inflation data came in considerably lower than expected, falling to 3.9%, compared to 4.6% in the previous month. Core inflation (which excludes items such as energy and food) also dropped from 5.7% to 5.1%. This increased expectations that the Bank of England will cut interest rates in the first half of 2024, providing a boost for UK shares and bonds.

Chinese shares continued to underperform, with the country facing debt problems, youth unemployment, and challenges in its real estate sector.

Finally, the Bank of Japan surprised investors with hints that its negative interest rate policy may soon end. Although this had a negative impact on Japanese shares, it also increased the value of the Japanese yen relative to other major currencies.


Most major indices posted healthy returns in December, causing global shares to climb by 4.7%, and global bonds by 4.2%.

Developed markets fared better than emerging ones in December; US shares delivered a gain of 4.4%, as economic resilience and falling inflation saw increasing confidence of a soft landing. European (+3.8%), and UK (+3.7%) shares also delivered strong returns in December

Japanese shares (-0.6%) underperformed, but this was offset by a strong appreciation of the Japanese yen. In the UK, the smaller FTSE 250 posted another month of strong performance (+8.0%), driven by lower interest rate expectations and an increased appetite for risk.

Emerging market shares (+3.7%) also delivered strong returns, with Chinese shares (-2.6%) falling behind once again.


Sterling continued to appreciate against the US Dollar (+0.9%). However, it depreciated against most other currencies, especially the Japanese yen (-4%), which was driven by expectations that the Bank of Japan may raise interest rates soon. The movement against the euro (-0.5%) was less significant.

The US dollar continued to depreciate against most currencies, as investors looked for riskier assets.

Investment type performance breakdown

Shares delivered positive returns (+4.7%) for our Original Plans in December, with performance from our US exposure somewhat dampened by sterling’s appreciation against the US dollar. Meanwhile, the underperformance of Japanese shares was offset by the significant appreciation of the Japanese yen.

Our healthy allocation to the US helped drive gains, while the UK FTSE 250’s share allocation was another key positive.  

In sterling terms, bonds also provided a healthy return (+3.4%) for the month. Both US and UK corporate and government bonds were strong performers, as our decision to favour bonds with longer maturities (which are more sensitive to interest rate movements) delivered well.

Original Plans also benefitted from our property exposure (+10.4%).

In our Ethical Plans, shares gained (+5.3%), with growth shares proving more sensitive to falling US bond yields. Bonds posted a gain (+3.5%), benefitting from the strong performance of UK sustainable corporate bonds and UK gilts.

All major asset classes delivered positive returns in December, with our diversified approach benefitting from many different areas, in both Ethical and Original Plans.

Summary with Plan details

The market continued to rally in December. Plans with a higher allocation to shares performed better than those with a higher allocation to bonds. However, all Plans delivered healthy, single-digit monthly returns.

Our Investment Team continue to actively monitor the financial markets and their impact on Plans — and are always ready to act in your best interests to events as they unfold. We are constantly evaluating new market information and drivers to keep your Investment Plan on track.

It’s important to remember that it’s normal for markets to go up and down, with periods of volatility to be expected when you invest. As always, we continue to look for opportunities to position your investments, with the goal of protecting your money and achieving your long-term objectives.

Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.

Please remember the value of your investments can go down as well as up, and you could get back less than invested. Past performance is not a reliable indicator of future results.

Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.

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