In the early part of 2023, the group of tech stocks known as The Magnificent Seven, led the market. The NASDAQ index, filled with these major tech companies, greatly outperformed the S&P 500. This happened mainly due to the enthusiasm for artificial intelligence innovations. The upward move was also fuelled by consistent earnings growth.
Later in 2023, the market rally widened as the US economy stayed strong despite ongoing recession fears. In the second half of the year, attention also shifted from rising interest rates to the possibility of them peaking or decreasing in 2024, as inflation started to stabilise. This altered view of the market on inflation and interest rates helped stocks perform well.
Over the past year, US equity funds have given very high returns.
What's the way forward for investors in these funds after such a big rally?
Exposure to US funds is important
Instead of focusing only on the past year's performance, it's better to consider two years of data. The market declined in 2022 and then recovered in 2023. Over two years, the market has been relatively stable or showed only slight gains.
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