In December 2023, the technology sector and the broader market posted positive performance, supported by market expectations of a possible more vigorous interest rate cut in the year ahead. Discussion revolved around a potential cut as early as March, reflecting the proactive approach taken by central banks in response to economic conditions. The market is toying with this idea, with current stock valuations at levels that already factor in up to five interest rate cuts.
This development comes in contrast to the previous year, when markets experienced tax optimization-driven sell-offs, but no such sell-offs are expected in 2023, given market growth. However, the possibility of a light sell-off at the start of the new year still exists, reflecting the unpredictability and tensions in the markets.
Market expectations of interest rate cuts will have a significant impact on investment decisions, particularly in the technology sector, which is sensitive to changes in interest rates due to their impact on capital expenditure and risk assessment. Given these expectations and current valuations, we monitor signals from central banks and economic indicators that could indicate the direction of future monetary policy.