Investment Monthly
Soft landings and hard truths
06 March 2024
Key takeaways
- Our expectation is for a soft-ish landing – a slowdown in nominal growth and mid-single digit profits growth in 2024
- That takes us to a ‘defensive growth’ positioning in portfolios. That would include a focus on international equities, quality in stocks and credits, and selective strategies in emerging markets. We see an important portfolio role for alternatives (especially private credit, hedge funds, infrastructure, and real estate)
- We see good opportunities in selected areas of global fixed income. We think “bonds are back” , especially in ‘Anglo Saxon’ markets. And also in emerging markets – Mexico, India, and Indonesia, for example
Macro Outlook
- The data currently suggests we are on the final approach to a ‘soft landing’ for the economy. We need to see continued progress on disinflation, resilient economic growth and labour market trends, and good news on profits to secure that soft landing
- Even if the soft landing is secured, a number of economic risks persist for later in the year. Geopolitics, elections and fiscal constraints can all impact the economic and market outlook
- Economic performance remains divergent in emerging economies. India will be the fastest growing economy in 2024, while the China outlook remains challenged by several growth headwinds
Policy Outlook
- Rate markets have priced-out cuts from the major central banks amid stronger macro data and central bank comments. We see the first interest rate cut from the Fed in mid-2024, with policy easing continuing in H2. The ECB and Bank of England are likely to follow the Fed
- Fiscal policy looks set to be a slight drag on growth in 2024 in western economies. But we do not expect a return to 2010s-style austerity
- EM central banks have been leading the global easing cycle, with rate cuts in Latam and Europe. We think that continues. Asia central banks are likely to ease policy during H2 2024. Policy support in China remains measured and targeted