Performance – Equities and bonds post strong finishGlobal equities had their sixth best year on record with the ACWI closing at +23%. S&P 500 (+26.3%) led DM returns, and Mexico led (+40.9%) EM returns. Technology (+51.4%) outperformed among global equity sectors. Fixed income rallied into year-end on rate-cut hopes; US HY (+13.4%) led total returns. DXY (-1.9%) sold off. Commodities saw Precious Metal (+12%) outperformance, while Energy lagged (-5%). Technicals – HY issuance rises; inflows into US large-capDM HY gross issuance increased by 55%Y in December and EM issuance rose by 12%Y. For US mutual funds and ETFs, on a T12M basis, US large-caps and long-term Treasuries saw largest net inflows, while HY credit and Agency MBS saw net outflows.Sentiment – MSI turns negative; vols at four-year lowsOur MSI flagged a risk-off signal in December after a 2-month surge in sentiment level (see here for more on the methodology). AAII bulls-bears touched its highest level since March ’21. VIX finished at 4Y lows.Global In the Flow2023 by the NumbersMorgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.M O R G A N S T A N L E Y R E S E A R C HGlobalMorgan Stanley & Co. LLCSerena TangStrategistserena.tang@morganstanley.com+1 212 761 3380Morgan Stanley & Co. International plc+Arif AhmedStrategistarif.ahmed@morganstanley.com+44 (0)207 425 1023Morgan Stanley India Company Private Limited+Soham SenStrategistsoham.sen1@morganstanley.com+91 22 6880-1207Morgan Stanley & Co. International plc+Erika Singh-CundyStrategistErika.Singh-Cundy@morganstanley.com+44 (0)207 425 0960Sign up here: If you didn’t receive this directly but would like to, please click here.Equities and HY credit led real returns in 2023The Morgan Stanley Cross-Asset Strategy team wishes all a Happy New Year.Source: Bloomberg, Morgan Stanley Research. Note: We compute annual returns minus US headline inflation. Green means returns (in USD) beat inflation, and red means returns trailed inflation. Data as of December 29, 2023.Ranking2021202220231REITS (32%)Commod. (0%)S&P 500 (22%)2S&P 500 (20%)USD Cash (-4%)MSCI JP (17%)3Commod. (18%)US 2yr (-10%)US Small (13%)4MSCI EU (9%)EM Local (-14%)MSCI EU (12%)5US Sm...
