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Foreword
Rethinking the macro landscape
Reframing globalisation
Redefining sustainability
2024 Market Outlook Foreword
We predicted that 2023 would be a challenging year. Unfortunately, we have been proven right. China’s economic recovery fell short of expectations, the US 10-year Treasury bond yield hit 16-year highs and inflation remained sticky. However, the global economy stayed resilient in the face of aggressive rate hikes and rising tensions in the Middle East. 2024 will bring about multiple transitions. Some of the global economy’s earlier resilience will give way as the full effect of restrictive monetary policy kicks in. In contrast, the Chinese economy will likely stabilise in 2024, having endured slower growth for most of 2023. Global central banks are likely to be at or close to the end of their rate hiking cycles as inflation pressures ease, although they would be wary of declaring victory over price rises too quickly. A pivot to rate cuts would be some months away. Nevertheless, a broad and sustained decline in inflation could usher in a turning point for bonds. We retain a quality bias in US and Asian bonds at this late stage of the economic cycle. Given elevated yields, US Treasuries may regain their historical role as portfolio diversifiers. As for equities, while Asia ex Japan lagged the US market in 2023, the region is expected to perform better on the back of attractive valuations and more favourable economic fundamentals in 2024. Beyond the cyclical shifts, the global economy and investing landscape will experience long-term structural transitions. The diversification of global supply chains will impact economic prospects and investment flows, while Generative Artificial Intelligence (AI) will disrupt business models and sectors. As economies continue their transition to a net-zero future, investors are increasingly applying a just transition lens onto climate action. Our report highlights the key roles Emerging Markets and Asia are playing in driving and adapting to these long-term transitions.
As investors seize the opportunities arising from the various transitions, they should be mindful of the potential risks and the lessons learned in 2023. Market volatility is here to stay as policymakers prioritise credibility over market pressures. Investors will need to be nimble in their views and positioning. Diversification and risk management remain key to navigating volatile markets and dynamic asset allocation will be ever more important when underlying market drivers are changing so swiftly.
Bill Maldonado Chief Executive Officer & Interim Chief Investment Officer
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