There are countless words to describe the year 2023. Naturally, the assessment lies in the eye of the beholder. From the usual dose of media sensations, to impressive developments in the field of artificial intelligence, and the tragic expansion of global conflicts, the year had a lot to offer.

Through the lens of investors, however, there was little reason for superlatives. On the contrary, we can sum up the 2023 investment year briefly as "pleasing, but actually quite normal."

Review

All traditional major asset classes contributed to performance. Regardless of composition, every "findependent portfolio" that remained invested generated a positive return in 2023 (all figures in CHF):

• Global Equities: +11.4%

• Swiss Equities: +6.0%

• CHF Corporate Bonds: +5.7%

• Swiss Real Estate Funds: +4.7%

The final quarter in particular made the difference. It helped that the world's major central banks signaled they would no longer raise their benchmark interest rates and might even cut them soon, while simultaneously expecting no recession.

The 2023 investment year was thus able to at least partially compensate for the disappointing previous year, and each of our main asset classes was also able to surpass the two important "minimum hurdles":

• Inflation of local consumer prices: 2.1%

• Estimated interest on Swiss bank accounts: 0.5%

In short, the review is encouraging.

Assessment

A look at past decades helps to put the past investment year into perspective and immediately relativizes it. For patient investors, equities have historically been reliable sources of return. The private bank Pictet estimates that Swiss equities have yielded an average of over 7% per year (p.a.) since 1926. [1]

The data for global equities from researchers Dimson, Marsh, and Staunton, who have recorded return data for 23 countries since 1900, shows similar results. [2] This is astonishing given the numerous crises (Great Depression of 1929-32, oil embargo of 1973-74, or the global financial crisis of 2008-2009) and catastrophes (WWI and WWII).

In historical comparison, the contribution of Swiss equities in 2023 was slightly below average, whereas global equities recorded a significantly higher return. The situation was reversed for bonds: Swiss papers delivered higher returns than their historical average (approx. 2% p.a.), while bonds in USD and EUR represented a loss-making business due to exchange rate movements. Lastly, Swiss real estate funds recorded an average result.

In summary, a carefully diversified portfolio delivered a pretty normal result in a historical context.

Timeless Lessons

You never stop learning. Every investor knows that investing is not an exact science. Every year brings surprises. Nevertheless, the 2023 investment year confirmed a few "certainties":

1. Investing pays off. As long as humanity strives for more and the major economic nations do not deviate too far from basic capitalist principles, financial investments will yield returns. Even risky equities deliver a positive return in most years, even if media headlines usually suggest otherwise.
   
   

2. Diversification reduces risks. At the beginning of the year, the recovery of the Chinese economy after the government lifted its anti-Covid measures was the big topic among experts. Chinese equities were recommended in unison. Conversely, hardly anyone recommended growth stocks after their catastrophic performance in 2022. Things turned out differently. The former fell further, while the latter increased sharply in value. Anyone who invested in both segments profited disproportionately from the latter.
   
   

3. Market timing is difficult. Until mid-October, interest rates rose relentlessly in most countries. Many experts spoke of permanently high interest rates and bad times for stock valuations. Since then, there is no more talk of this, and various stock indices are trading at record highs.

Outlook

We do not make forecasts. They are not worth the paper they are written on. Market prices are created by the simultaneous convergence of actions by countless people, each following their own goals, beliefs, and gut feelings. It is impossible to predict this continuously and reliably.

Our recipe is and remains simple. Follow the certainties above and invest for the long term and at low cost.

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Footnotes

[1] https://www.pictet.com/ch/de/letzte-nachrichten/historische-performance-von-schweizer-aktien-und-schweizerfranken-obligationen

[2] https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/credit-suisse-global-investment-returns-yearbook-2023-summary-edition.pdf