The RoRy Financial Newsletter | Dec 2023
Topics include US Economy, Upcoming Indian Elections, Charlie Munger
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Market overview of last month?
The Nifty 50 index touched the month's high at 20,158 and the month's low at 18,973 (last month was 19,849 and 18,837 respectively). The primary reason is the news that the Federal Reserve (USA Central Bank) could be done with hiking rates and will cut borrowing costs next year as inflation cools. Additionally, China's ongoing struggles with debt and deflation issues contribute to a positive outlook for India, as foreign institutional inflows are anticipated to rise. Oil prices also have dropped globally, which is good news for India being a net oil importing country.
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The US economy’s shifting narrative
The economic narrative coming out of the USA is currently ambiguous. While some claim it's in a recession, others argue it's a minor downturn and that the US will emerge resilient. Recent data indicates inflation is reducing, possibly leading the Fed to halt rate hikes. However, sceptics warn that any decline in inflation is likely to be gradual and that the optimism prevalent in the financial markets is premature. The consensus is that the US remains at the forefront of technology. Tech stocks and companies are expected to do well in the short to medium term. Moreover, they might be poised to reap long-term benefits, given the pivotal role of technology in shaping the future of various industries.
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The impact of elections on the stock markets
India is only six months away from the 2024 general elections, which are expected to happen in April and May 2024.?The question in everyone’s mind is what will be the impact on the stock markets. Here is some data
Market Performance - Returns (%)
source – icicidirect.com
The table above shows that there isn’t a clear pattern of consistent impact on the markets in the lead-up to general elections. What does emerge, however, is a narrative of heightened volatility during this period. We know that a stable government reassures investors; fragmented or uncertain election outcomes cause market turbulence and uncertainty. We also know that for the last three decades the Indian corporate landscape has thrived in a conducive environment. Looking ahead, the outlook for the short and medium term remains positive. ?Hence we can hope for a positive post-election market outlook.
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What can equity mutual fund investors do?
The Nifty is currently at lifetime highs and does not give much scope for investors who want to invest lumpsum amounts. However, the period surrounding elections can provide a window of opportunities where such investors can enter. SIP investors can continue their investments. On the U.S.A front, the Nasdaq Index has surpassed the 14,000 mark but is still approximately 10% below its lifetime high. Despite less favourable tax slabs compared to Indian equity funds, U.S. tech funds remain attractive due to historically high returns, regional diversification, and participation in the world's largest companies. These factors make them worth considering for investors seeking growth and exposure to global markets.
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Charles Thomas Munger?(Jan 1, 1924?– Nov 28, 2023)
Charlie Munger passed away a few days back. Most folks who are into investing lore know him for his investing wisdom and his famous partnership with Warren Buffett. I always liked his straightforward views and emphasis on common sense backed decisions. In tribute, here are three memorable quotes
I think a life properly lived is just learn, learn, learn all the time.
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The world is full of foolish gamblers and they will not do as well as the patient investors
You don’t have a lot of envy, you don’t have a lot of resentment, you don’t overspend your income, you stay cheerful in spite of your troubles, you deal with reliable people and you do what you’re supposed to do. All these simple rules work so well to make your life better.
That’s all, folks. Have a great year end!
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Disclaimer - Mutual Fund investments are subject to market risks, read all scheme related documents carefully.