As the year draws to a close, and before fear and panic sets in as we realise how much there is left to do before the big day, we take a moment to reflect on the year gone by, highlighting the financial winners and losers of 2023.
This year has been dominated by military conflicts in Ukraine and the Middle East, and closer to home the UK has suffered high interest rates (which have now hopefully plateaued), high inflation (also easing off) and extreme weather conditions. In a turbulent world, it hasn’t been a bed of roses for financial markets.
So which areas of the market have benefitted from this environment, and which have suffered?
Best performing sectors
It may come as no surprise that the best performing sector of 2023 was Technology and Technology Innovation, with the average fund returning 32%*.
The sector made a significant comeback from its position as the second worst-performing sector in 2022 (returning -27.5%**), to top of the charts. Performance was almost entirely driven by the so-called ‘Magnificent Seven’ (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla).
Read more: Four ways to invest in technology
Technology is followed by two emerging market regions – Latin America (15.6%*) and India/Indian Subcontinent (14.7%*). Another surprise performer has been European equities, returning 9.7%* this year, in spite of the lacklustre economic backdrop of the region.
Best performing funds
The best performing Elite Rated fund in 2023 has been T. Rowe Price US Large Cap Growth Equity, which has returned 37.1%*. A concentrated, high-conviction strategy, investing in large US firms that demonstrate innovation and change, it included six of the ‘Magnificent Seven’: Microsoft, Apple, Amazon, Alphabet, Nvidia and Meta account for almost 43%*** of this fund.
In second and third place are Sanlam Global Artificial Intelligence and Baillie Gifford American, further reflecting the dominance of technology stocks, particularly those with exposure to artificial intelligence, and the high returns of US equities in recent years.
Read more: Beyond the Magnificent Seven
Top 10 performing Elite Rated funds in 2023
| Rank | Fund name | Percentage returns year to date* |
| 1 | T. Rowe Price US Large Cap Growth Equity | 37.1% |
| 2 | Sanlam Global Artificial Intelligence | 31.4% |
| 3 | Baillie Gifford American | 30.6% |
| 4 | Guinness Global Innovators | 26.4% |
| 5 | AXA Framlington Global Technology | 26.3% |
| 6 | Ninety One UK Special Situations | 21.6% |
| 7 | GAM Star Disruptive Growth | 21.4% |
| 8 | Brown Advisory US Flexible Equity | 21.1% |
| 9 | BlackRock Global Unconstrained Equity | 20.4% |
| 10 | AXA Framlington American Growth | 20.2% |
The under performers
At the other end of the table, the China/Greater China sector was by far the worst performing, with average returns of -20.6%*.
China has been facing political risk and economic challenges, including continued real estate issues, weak consumer demand, poor growth and deflation. The World Bank has cut its forecast for China’s growth in 2024**** and warned that the country’s economic weakness could drag the wider region to its worst growth in half a century.
However, could this be the perfect time to invest in China at incredibly cheap valuations? China is still the second largest economy in the world. If the consumer was to come back and sentiment improved with a softening of geo-political risks, it’s not impossible to see China at the top of the best performers list next year.
The second and third worst performing sectors were Commodity/Natural Resources and Healthcare at -7.5% and -7.4% respectfully*.
Commodity and natural resources saw a strong reversal in fortunes this year from top of the charts in 2022**. Commodity prices have dropped as the world has adjusted its energy supply. Performance is also linked to China’s economic weakness, prompting lower demand for commodities for infrastructure development. If the Chinese economic situation picked up, this sector might revive.
Healthcare has been hit by rising interest rates, however, if rates were to come down next year, healthcare would also benefit. Gareth Powell, manager of the Polar Capital Global Healthcare Trust, gave us thoughts on the outlook for healthcare in 2024 in a recent interview.
Watch the full interview as he discusses the recent underperformance of healthcare stocks and three key themes that present significant opportunities for investors in 2024 and beyond.
*Source: FE Analytics, total returns in sterling, 1 January 2023 to 7 December 2023
**Source: FE Analytics, total returns in sterling, 1 January 2022 to 31 December 2022
***Source: fund factsheet, 31 October 2023
****Source: The economic times, 2 Oct 2023
