Our market is heavily weighted to defensive businesses that pay attractive dividends, such as real estate, infrastructure and utilities.
These sectors are particularly sensitive to changes in interest rates, so we might need to see some respite on that front before they start performing well again.
In the eyes of financial markets, that will happen next year.
Current pricing suggests a cut in the official cash rate by July or August, while in the US, UK and Europe declines could come earlier still.
Our Reserve Bank begs to differ, and it sees another hike as more likely than any cuts in 2024.
The interplay between inflation, migration and the labour market will be a crucial determinant of who is right.
Internationally, politics will be a major theme in the coming 12 months.
The main event will be the US election in November. It’s shaping up as a presidential rematch between Joe Biden and Donald Trump, the first since 1956.
More often than not, the incumbent party wins, the odds rising to almost 70 per cent when a sitting president is running.
That puts Biden in the box seat. However, his approval ratings are very low and if the US economy stumbles, things will quickly swing back into Trump’s favour.
The Taiwanese election on January 13 is also worth keeping an eye on.
The two leading opposition candidates have formed a joint presidential ticket, which increases the likelihood of a pro-mainland regime being inaugurated in May.
That would allow China to make progress integrating Taiwan without the use of force, which might reduce near-term geopolitical risks.
Turning back to markets, it’s always a challenge to predict what’s ahead, and 2024 will be no different.
Lower inflation and falling interest rates are unambiguous positives, especially for fixed income, which should have another solid year.
The outlook is murkier when it comes to shares, because a tailwind of easing monetary policy could be offset by weaker growth.
It’s certainly not inevitable, but some indicators still point to recessionary risks on the horizon for some economies.
If these prove accurate, forecasts for global earnings growth of more than 10 per cent in 2024 could be too high.
A challenging year would likely see larger companies outperform smaller ones, and defensive and growth stocks hold up better than their more cyclical (and economically sensitive) counterparts.
That sort of backdrop could mean another good year for the US, given its sector makeup.
The US dollar typically remains resilient during periods of weakness, which is another reason local investors should maintain a healthy exposure to the world’s biggest sharemarket.
The New Zealand sharemarket looks well-positioned, with a plethora of stable businesses, a high sensitivity to any fall in interest rates and the fact it has lagged most other markets this past year.
This year has been stronger than most people predicted and - provided they were well-diversified - investors should have done well.
We’re not out of the woods yet though, and it’s too early for central banks to declare victory.
For investors, it would be wise to hedge your bets in 2024.
Being too cautious is just as risky as being overly optimistic, and adopting a defensive stance is more sensible than running for the hills.
After all, things may well turn out better than many expect, just like they have this year.
Mark Lister is investment director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision Craigs Investment Partners recommends you contact an investment adviser.
