December 2023

By Forrest Private Wealth

At Forrest Private Wealth, our investment philosophy underpins our financial planning advice, which ensures our client’s wealth benefits from long-term exposure to equity markets. We believe holding a well-diversified portfolio of predominantly dividend-paying businesses over a long-term period is essential in financial planning for wealth accumulation and, ultimately, retirement planning.

By following our retirement planning process, a Forrest Private Wealth financial planner stays true to their investment advice, ignoring the noise and pressures of the market to provide their clients with a stress-free retirement. At Forrest Private Wealth, our financial planners capitalise on an investment philosophy that provides predictable income streams from equity markets, setting clients up for their desired retirement.

Long Term Portfolio

Despite the doom and gloom fed by the global central bank rate tightening cycle and the impacts to the cost of living, equity markets delivered good returns in 2023. The LONG portfolio delivered a 13.53% return for 2023, ahead of both the ASX200 index and its benchmark.

The story of 2024 will largely centre around whether the inflation battle has been won. Central banks will not want to ease monetary policy too quickly, however most commentators are predicting a drop in interest rates in 2024. The use of the word recession is not off the table as yet, however, it is used more sparingly than early to mid 2023.

Should the interest rate reduction story play out, we expect equity markets to continue to rally in 2024.

Short Term Portfolio

In 2023, financial markets experienced significant volatility with the economy defying expectations of a recession. Underlying economic activity remained resilient, and the anticipated negative impact of higher interest rates did not materialize.

Central banks have shifted their focus from discussing the need to raise interest rates, leading investors to anticipate interest rate cuts from central banks within the year ahead. This contrasts with the consensus view only two months ago, which suggested that rates would need to stay higher for longer.

The approaching major elections in 2024 and increasing geopolitical risks introduce the potential for conflicts or unexpected outcomes that could unsettle investors in the coming year. However, historical trends suggest that market reactions to such events tend to be brief, with recovery occurring once economic and political uncertainties subside.

Modest interest rate cuts, coupled with slowing yet positive economic growth, are expected to provide support for interest rate-sensitive assets like bonds, equities, property, and infrastructure. The combination of falling inflation and low bond market volatility enhances the likelihood of diversified portfolios such as the Short SMA to deliver returns that surpass the rate of inflation. This contrasts with recent years when portfolios struggled due to the impact of rising inflation and corresponding increases in bond yields on asset class valuations.

Micro Cap Portfolio

With most central banks calling the ‘job done’ on monetary policy measures to tame inflation, capital is starting to come back into the smaller end of the market. The micro-cap portfolio delivered an 11.77% return for the 2023 year with almost 10% of that return coming in November and December. It is expected that as confidence grows in equity markets, capital will continue to flow into the micro-cap sector.

Every fund manager we have spoken to have mentioned that it is time to invest in the small end of the market. However, we counter this with a Buffet quote “you should never ask a barber if it is time for a haircut because the answer is always yes!”.

We still see good value in the smaller end of the market. Low valuations combined a supportive macro environment, provide a great opportunity for a good year ahead.

Forrest Private Wealth’s discipline in providing financial planning, retirement planning, and wealth management services to its clients allows our clients to benefit from years of experience providing financial advice through major impacts to equity markets where staying the course has helped them.

Forrest Private Wealth has a dedicated team of financial planners and support staff providing clients with peace of mind in working towards and achieving their life goals.


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