Mercer’s fourth Quarter 2023 Market Review

as of December 31, 2023

Global equity markets performed strongly during the fourth quarter, largely driven by a sharp decrease in longer-term rates following the Federal Reserve’s more dovish than expected statement in December. This led the market to price in significant rate cuts in 2024. Volatility remained subdued and declined during the quarter as asset classes rallied across the board. US economic growth proved remarkably resilient in 2023 and investors are now hoping that easier monetary policy will continue to serve as a tailwind in in 2024, offsetting less expansionary fiscal policy and potentially lower consumer spending.

US inflation has fallen significantly. Headline CPI was 3.4% year-over-year through December, while core CPI came in at 3.9%, an over two-year low. Inflation is expected to decline further as remaining inflationary components such as shelter roll over. Labor markets have shown signs of softening from tight levels, which also should help inflation fall back to target. With rates ending the year in restrictive territory, central banks are now openly signaling an end to the hiking cycle. Markets have priced in several rate cuts in the US for the year, starting as early as March while the Federal Reserve’s own rate projections indicate lower rates by the end of 2024.

After a soft period during the third quarter, global equities rebounded sharply in the fourth quarter, with the MSCI ACWI Index, a measure of global equities, returning 11.0%.  The Index gained 22.2% for 2023. The S&P 500 rallied strongly during the quarter lead by the Magnificent 7 (NVIDA, Meta, Apple, Amazon, Microsoft, Alphabet, Tesla) but the rally broadened as well. The S&P 500 Index returned 26.3% for 2023. International developed stocks returned 10.4% in the fourth quarter, bringing their 2023 gains to 18.2%. Emerging market equities returned 7.9% in Q4 and gained 9.8% in 2023.

Within fixed income (bonds), the Bloomberg Aggregate Index returned 6.8% during the quarter and 5.5% for2023. Treasuries returned 5.7% and corporates returned 8.5%. The yield curve shifted lower during the quarter. US high yield bonds returned 7.2% during the quarter, bringing the 2023 return to 13.4%.

Global developed REITs returned 15.6% during the fourth quarter, outperforming broader equity markets. Globel developed REITs return 10.8% in 2023. Core infrastructure stocks returned 10.8% during the quarter. Commodities generally decreased during the quarter along with natural resources.

We expect US economic growth to slow in 2024, but to avoid a hard landing, especially following the Fed’s latest comments. Geopolitical risks remained in the forefront as the Gaza and Ukraine conflicts continued and shipping in the Red Sea was temporarily disrupted in December due to missile attacks. While the initial market impacts have been limited, there is the risk of escalation with potential impacts on oil markets. Our outlook for global equities has improved from a macro and policy standpoint but high US equity valuations remain a concern after strong quarterly returns.

Important notices

References to Mercer shall be construed to include Mercer LLC and/or its associated companies.

© 2024 Mercer LLC. All rights reserved.

This contains confidential and proprietary information of Mercer and is intended for the exclusive use of the parties to whom it was provided by Mercer. Its content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity without Mercer’s prior written permission.

Mercer does not provide tax or legal advice. You should contact your tax advisor, accountant and/or attorney before making any decisions with tax or legal implications.

This does not constitute an offer to purchase or sell any securities.

The findings, ratings and/or opinions expressed herein are the intellectual property of Mercer and are subject to change without notice. They are not intended to convey any guarantees as to the future performance of the investment products, asset classes or capital markets discussed.

For Mercer’s conflict of interest disclosures, contact your Mercer representative or see This does not contain investment advice relating to your particular circumstances. No investment decision should be made based on this information without first obtaining appropriate professional advice and considering your circumstances. Mercer provides recommendations based on a client’s particular circumstances, investment objectives and needs. As such, investment results will vary and actual results may differ materially.

Information contained herein may have been obtained from a range of third party sources. While the information is believed to be reliable, Mercer has not sought to verify it independently. As such, Mercer makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential, or incidental damages) for any error, omission or inaccuracy in the data supplied by any third party.

Past performance is no guarantee of future results. The value of investments can go down as well as up, and you may not get back the amount you have invested. Investments denominated in a foreign currency will fluctuate with the value of the currency. Certain investments, such as securities issued by small capitalization, foreign and emerging market issuers, real property, and illiquid, leveraged or high-yield funds, carry additional risks that should be considered before choosing an investment manager or making an investment decision.

Investment management and advisory services for U.S. clients are provided by Mercer Investments LLC (Mercer Investments). In November, 2018, Mercer Investments acquired Summit Strategies Group, Inc. (“Summit”), and effective March 29, 2019, Mercer Investment Consulting LLC (“MIC”), Pavilion Advisory Group, Inc. (“PAG”), and Pavilion Alternatives Group LLC (“PALTS”) combined with Mercer Investments. Certain historical information contained herein may reflect the experiences of MIC, PAG, PALTS, or Summit operating as separate entities. Mercer Investments is a federally registered investment adviser under the Investment Advisers Act of 1940, as amended. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Mercer Investments’ Form ADV Part 2A & 2B can be obtained by written request directed to: Compliance Department, Mercer Investments, 99 High Street, Boston, MA 02110.

Contact Us