2023: a year in review

2023 in review

Welcome to Uncommon Truths, Paul Jackson and Andras Vig’s regular in-depth look at the big topics impacting markets. 

Despite central banks tightening more than expected and economic slowdown, global asset returns have been pretty good during 2023. Equities and high yield have performed the best (among assets that we cover) but all assets have generated positive returns (except commodities).

Judging by Bloomberg's most-read news items, we have been focused on the Fed but there has also been a fair amount of financial industry navel gazing. The US regional banking mini crisis and the situation in Gaza/Israel barely featured in the top-10 most read list.

After a very successful 2022, this year has been less rewarding for the Aristotle List of 10 surprises (only 3/10 correct, assuming that US core CPI inflation dips below 4.0% in December). The list for 2024 will be published on 7 January. In the meantime, we need to ponder whether the recent good run in financial markets has already delivered all of the performance that we were expecting in 2024.


The optimal portfolios are theoretical and not real. We use optimisation processes to guide our allocations around “neutral” and within prescribed policy ranges based on our estimations of expected returns and using historical covariance information. This guides the allocation to global asset groups (equities, government bonds etc.), which is the most important level of decision. For Uncommon Truths, the optimal portfolios are constructed with a one-year horizon. 

We’ve chosen to include equities, bonds (government, corporate investment grade and corporate high-yield), real estate investment trusts (REITs, to represent real estate), commodities and cash, on a global level. We use cross-asset correlations to decide which decisions are the most important. 

Using a covariance matrix, based on monthly local currency total returns for the last five years, we run an optimisation process that maximises the Sharpe Ratio. Another version maximises Return subject to volatility not exceeding that of our Neutral Portfolio. The optimiser is based on the Markowitz model. 

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.  

Important information

  • Views and opinions are based on current market conditions and are subject to change.

    This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

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