2024 Global Market Outlook Midyear Update
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Investment Specialist, Capital Markets, Ritu Vohora, summarises some of the key themes that have been discussed during the 2024 Global Market Outlook Midyear Update webinar that took place on Wednesday 19th June.
As we head into the second half of 2024, we’re in a different market environment than expected, with a rate environment that has shifted toward “higher for longer.” Expectations for rate cuts have been pushed out further, with far fewer anticipated, and markets have repriced accordingly.
Most developed market central banks face a delicate balance between cutting too soon and fueling an acceleration in inflation or keeping rates higher for longer and causing a slowdown. In the United States, we expect the Fed will keep rates steady for longer in order to bring inflation sustainably lower. In other regions, including the UK and Europe, the path is clearer for cuts before year-end. We expect Japan will gradually continue tightening too.
Monetary policy will have investment implications for investors, as we move from recession risk to inflation risk. Sticky inflation remains a threat and could inflect higher as global growth broadens. Election cycles also put upward pressure on inflation, and we’re mindful of an escalation in geopolitical issues. We have overweight positions in real assets and inflation protected government debt as an inflation hedge.
Within fixed income, we have a preference for short duration bonds. And while credit spreads are tight, all-in yields look attractive, with the potential for price appreciation if yields move lower—we are overweight high yield and emerging market debt.
The Magnificent Seven tech stocks drove the bulk of gains in 2023. We believe generative AI will create long-term winners, but stock selection will be key, as performance of the group continues to fragment. Furthermore, its impact on power and the industrial complex is creating opportunities for investors.
We anticipate a continued broadening of markets and think it is prudent for investors to diversify into areas that have valuation support and robust fundamentals, such as value stocks. More broadly, we continue to favor Japan and see select opportunities in emerging markets such as South Korea and Vietnam.
An active approach is key to navigating these shifting market conditions.
How central bank policy could impact your portfolio
Expectations of central bank policy have shifted since the beginning of the year. What factors will shape the path of rate cuts in the second half of 2024?
Broadening global growth, resurgent inflation define outlook
Each month, our Investment Committee prepare a report revealing the two market themes they are watching, their bull and bear views per region and their latest asset class over and underweights.
It has been designed to aid you in your decision making and client conversations.