OUTLOOK 2024
After the Rate Reset: Investing Reconfigured
There haven’t been this many attractive investment choices to consider in more than a decade. But how do you personalize the possibilities? Explore these five considerations.
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SELECT YOUR INTEREST
Inflation
Inflation will likely settle. You should still hedge against it.
01
Cash
The cash conundrum: the benefits and risks of holding too much
02
Bonds
Bonds are more competitive with stocks—adjust the mix according to your ambitions
03
Stocks
With AI momentum, equities seem to be on the march to new highs
04
Credit
Pockets of credit stress loom, but they will likely be limited
05
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Inflation
Inflation will likely settle. You should still hedge against it.
Although we expect inflation to fall in 2024, the rate reset signals that inflation will be higher—and more volatile—than it was in the 2010s. As a result, it will make sense to find ways of mitigating inflation's effects on your portfolio. Equities are one option. So are real assets, such as real estate, which over the past 30 years has posted income that has generally outpaced inflation.
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Cash
The cash conundrum: the benefits and risks of holding too much
In the last two years, our clients have added at least $120 billion to money market funds, Treasury bills and other short-term fixed income investments to generate incremental yield with limited downside risk.
1
That’s not a big surprise—holding more cash than you usually do when rates are high and other markets are volatile can work well. But today’s high yields might not last as long as you’re expecting, and cash in the coming cycle will have its own subtle risks.
That’s not a big surprise—holding more cash than you usually do when rates are high and other markets are volatile can work well. But today’s high yields might not last as long as you’re expecting, and cash in the coming cycle will have its own subtle risks.
Back to Overview
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Bonds
Bonds are more competitive with stocks—adjust the mix according to your ambitions
There haven’t been this many attractive choices since the global financial crisis. For one, higher rates mean there’s now an opportunity to reduce equity risk by adding more fixed income without jeopardizing your financial goals. But keep in mind that solid earnings growth could propel equity markets higher over the next year before you decide how to optimize the mix of your multi-asset portfolio.
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Stocks
With AI momentum, equities seem to be on the march to new highs
Equities defied expectations in 2023, and we expect them to keep climbing in 2024. Leaner cost structures and powerful, if well-known, trends (artificial intelligence, weight-loss drugs) will likely propel markets to new highs.
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Credit
Pockets of credit stress loom, but they will likely be limited
Tighter credit is causing stress in certain sectors, especially commercial real estate and leveraged loans. But we think it will be contained, and a recession in 2024 is unlikely. Specific stressed areas of the economy, in fact, could represent an opportunity.
Our Global Perspective
Indian equity is one of the few emerging markets where stock investors have been rewarded for underlying economic growth.
Europe’s luxury goods sector delivers global brands with enduring pricing power, renewed by digital innovation.
Nearshoring creates new openings for Latin American markets, especially in Mexico.
Our Global Investment Strategy View integrates the knowledge and analysis of our economists, investment strategists and asset class strategists. This month’s focus: Investment implications of the rate reset.
Conclusion: Investing reconfigured
As we head into 2024, investors find more options for their portfolios than at any time since the global financial crisis. Bond yields are high. Equity valuations are fair. Private markets continue to offer premiums over their public counterparts, while also becoming more accessible to investors. Even cash doesn’t look so bad.
Weigh your options. Evaluate their implications, for 2024 and beyond. Personalize the possibilities. And finally, harness the power of markets to help realize your long-term financial goals.
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1 Source: J.P. Morgan. Data as of September 30, 2023. Clients referenced are global clients of the Private Bank.
