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The Cantor Fitzgerald Multi-Asset 70 Fund celebrated its 30th anniversary in 2023. In this article, John Deehan asks Pearse McManus to comment on what happened in the market in 2023, what Cantor’s outlook for 2024 is and the significant trends that could impact markets over the next few years.
1. How did the market perform in 2023?
The market performed strongly in 2023, with global equities rising by about 8%, an outcome that has surprised many who were calling for continued declines in equities and an economic recession driven by the tightening of monetary policy over the last two years. Technology has outperformed significantly, leading to a narrative that, excluding the top seven US stocks, equity returns have been relatively pedestrian. But in the US, 90 stocks are up over 30%, 125 are up more than 20%, and almost 200 are more than 10%. Similarly, in Europe, more than 50 stocks are up more than 30%, and nearly 100 stocks are up more than 20%. The alpha opportunities this year have been numerous.
2. The last two years have seen many developed market Central Banks raising interest rates to bring inflation back to its 2% target. How successful have Central Banks been, and what is your outlook for inflation and interest rates in 2024?
Central Banks have raised interest rates significantly, and inflation has fallen considerably. It remains above the 2% target, but the direction of travel seems clear, with more evidence building over the summer that the spike in inflation was indeed transitory. What has confounded most market participants is that this fall in inflation from 50-year highs has not resulted in a significant increase in unemployment or, indeed, an economic recession, which was the base case for most market participants at the beginning of this year. Central Banks are now in a position where they have done enough in terms of monetary tightening; inflation is falling, and they can begin to reduce interest rates over the next year from their current restrictive levels.
3. What other headwinds did the market face in 2023, and how did it cope with them?
There were several headwinds over the year – the ongoing war in Ukraine, two of the three largest ever bank failures in the US early in the year, driven by the rise in longer-dated bond yields, worries about the debt ceiling and a potential US government default, the resumption of student loan repayments, a significant rise in longer-dated bond yields over the summer as central banks’ “higher for longer” mantra gained traction, renewed conflict in the Middle East, and ongoing concerns about China’s property market and economic momentum, to name but a few. Equity markets coped well with these headwinds. The biggest potential shock (US debt default) turned out to be little more than political theatre in Washington; the strong employment markets continue to support the consumer (along with the fall in inflation), and central banks have more recently delivered a clear message that policy has peaked, supporting bond markets. Despite the awful conflicts worldwide, the price of oil has fallen.
4. Are equities attractively valued as we move into 2024?
Structural factors such as digitisation, deglobalisation and decarbonisation, which are supported by public policy, will continue to drive earnings and growth for those companies exposed to them. In addition, policy rates and bond yields have peaked. They will likely fall, supporting economic growth and improving earnings outlooks for cyclical sectors of the market, all of which provide a very favourable backdrop for equity markets.
5. Are some geographic regions more attractive than others?
At Cantor, we focus more on sector and factor allocations than regions, given the global nature of the companies we primarily invest in.
6. What about the tech sector? Does Cantor believe this represents a bubble or a significant long-term investing trend?
One of our key themes is digitisation. Each iteration of the technology cycle over the last fifty years has seen technology and computing platforms build on themselves.
The emergence of AI has accelerated this further, a revolutionary technology that will drive productivity and margins, impacting many different industries and renewing and reinvigorating investment cycles.
7. How about bonds? They have had a tough couple of years. Is now a good time to invest?
Bond yields have fallen of late from their peaks in October but remain attractive in a world where policy rates have peaked and will likely fail, and inflation is normalising. This leads to a very attractive investment scenario for multi-asset funds, particularly where the fund’s defensive element can finally capture a positive yield.
8. Do you expect a recession in 2024? If yes, what regions are most exposed?
Growth is likely to slow from here but is expected to remain positive. The European economy has been relatively weak of late, although there are signs that the outlook is improving at the margin. With the normalisation of inflation, central banks are in a position to support the economy rather than constrain it, reducing the likelihood of recession. Public policy will also continue to support structural growth via deglobalisation and decarbonisation.
9. Considering your outlook, how are you positioning your funds going into 2024?
The funds are fully invested going into 2024, inflation is normalising, monetary policy has peaked, structural growth forces remain solid, and there are signs of a cyclical rebound.
10. How have markets changed since you launched the Cantor Multi-Asset 70 Fund in 1993?
A lot has changed in thirty years! The speed of news flow, the openness of central banks, a more integrated global economy, and the ability of technology to facilitate a deeper understanding of the workings of the global economy and its companies are but a few of the changes we have seen.
11. What are the biggest challenges the market faced since 1993?
There are always challenges facing the global economy and financial markets, and it might sometimes feel that the challenges in front of us loom larger than any we have faced in the past. However, simply listing some of the significant challenges faced by markets over the last 30 years and looking at our fund’s long-term performance should highlight that genuine active management will deliver significant benefits to investors. In the last 30 years, some of the challenges include the Mexican Currency Crisis (1994), the Asian currency Crisis and LTCM (1997), the Internet Bubble (1999-2000), the bursting of that bubble (2000), September 11th 2001; Global Financial Crisis (2008); Eurozone Sovereign Debt Crisis (2011); and Covid (2020).
12. How has the Cantor Multi-Asset 70 Fund performed since its launch?
The Cantor Multi-Asset 70 Fund has delivered a return of 10% p.a. since its launch 30 years ago. Furthermore, the average six-year return through that period has been more than 8% p.a., a testament to the strength of our process1.
1. Source: Bloomberg & CFAM as at 30 Nov.2023. Based on the performance of the underlying Cantor Fitzgerald Multi-Asset Fund in which the Aviva Fund invests in. Based on Gross performance so does not include the impact of fees and charges. Inception date is 31 Oct 1993.
Unless otherwise stated the source of all information is Cantor Fitzgerald as of December 2023.
| Warning: Past performance is not a reliable guide to future performance. Warning: The value of your investment may go down as well as up. Warning: The income you earn from this investment may go down as well as up. Warning: If you invest in these funds you may lose some or all of the money you invest. Warning: These funds may be affected by changes in currency exchange rates. Warning: If you invest in a pension, you will not have access to your money until you retire. |
