With 2023 at a close, financial markets are at an important junction. Major developed market central banks have paused their rate rises and there is considerable uncertainty about what happens next.
With views ranging from a ‘soft landing’ to recession, ‘higher for longer’ interest rates to rate cuts, the path ahead is uncertain. In the Investment Perspectives, Peak views: what lies ahead in 2024? Fabiana Fedeli, CIO of Equities, Multi Asset and Sustainability, and Jim Leaviss, CIO of Fixed Income, along with experts from M&G’s equities, fixed income and private assets teams, provide their insights on the main topics driving markets.
We highlight three themes - higher for longer, structural trends and active management – that we believe could provide a route through the tricky investment landscape and offer opportunities in 2024 and beyond.
Higher for longer?
Major central banks have raised interest rates dramatically in the past two years to bring inflation under control. Inflation has come down and there is a growing belief that we could be at the end of the tightening cycle. The big issue is how long policymakers will keep rates at elevated levels. Even if there are rate cuts next year, as the market currently anticipates, interest rates are unlikely to return to the exceptionally low levels of recent years. We consider the potential impact of this shift to a new regime and tighter monetary policy.
Structural not cyclical
Against a backdrop of heightened near-term macroeconomic uncertainty, we believe that there is value in taking the long view and concentrating on investment themes that have a future focus. Across public and private markets, we think long-term structural trends can offer compelling opportunities for patient investors. In our view, themes such as innovation including artificial intelligence, infrastructure and sustainability and decarbonization should endure, regardless of the current complex macroeconomic outlook.
A new era for active management?
Active management has faced numerous challenges in recent years, from the rise of passive strategies to positively correlated returns across asset classes. In our view, the COVID-19 pandemic and the end of the low interest rate environment could create more favorable conditions for active managers. Increased dispersions in valuations and the importance of identifying winners in a tougher environment could potentially benefit disciplined, selective investors.
In addition to the report, watch a video where M&G Investments' CIOs Jim Leaviss and Fabiana Fedeli share their insights on the potential investment opportunities in bonds and equities in 2024 and beyond.
Click the image to watch the full video. To read more on M&G Investment perspectives, visit M&G Investment's website.
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