OUTLOOK 2024After 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.

Download the full report (PDF) Outlook 2024

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.

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.

 

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.

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.

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.

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.

Global Investment Strategy View

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.

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After the rate reset: Investing reconfigured

In our view, there haven’t been this many attractive investment choices to consider in more than a decade. But how do you personalize the opportunities?

Join us as our team of specialists discusses five considerations that may help you navigate the current environment:

  • Inflation will likely settle but it may still be a good idea to consider hedging against it. There are options to consider, such as equities and real assets.
  • The cash conundrum – yes, yields are tempting. But we think this is as good as it gets.
  • Bonds are more competitive with stocks – adjust the mix according to your ambitions.
  • Equities are marching to new highs driven by AI and weight loss drugs.
  • Pockets of credit stress loom, but they will likely be limited.