The past three years have been a roller-coaster ride of fear, greed, opportunity, loss and profit. I put those last three words in that order for a reason: despite a slowing economy, rising prices and accelerating interest rates, the Australian Securities Exchange delivered a healthy gain in 2023. And in the US, the S&P 500 did even better.
Here at home, the information technology sector was the top performer, followed by consumer discretionary. How is that possible, with a slowing economy and retail sales (excluding food) going backwards, year on year?
Essentially: expectations. The prospect of lower sales (and consequent lower profits) was largely factored into share prices at the beginning of 2023. To wit: when Harvey Norman (in which I own shares, for the record) announced that sales had fallen 12% for the first few months of the new financial year, the share price hardly budged.
Expectations matter, in the short term. They matter in the long term, too, but as our timeframes lengthen, it's business quality – and long-term results – that will almost always be the main
