The report expects moderate global economic growth of around 2.8% in 2024. Inflation is forecast to moderate but remain elevated, with consumer price inflation of 2.8% in the US and 2.9% in the eurozone. GDP growth is expected to be higher in Germany, France and Spain compared to the US and Japan. China is projected to see GDP growth of 4.7% in 2024.
Monetary policy is a key factor, with interest rate hikes slowing economic activity. The report expects up to three interest rate cuts each from the Fed and ECB in 2024 as inflation comes down. However, rates are still seen remaining at elevated levels compared to pre-pandemic.
Asset class views
Equities are seen as offering reasonable potential, especially in the US where a recession is not expected. Earnings growth of around 10% globally is forecast for 2024, with Europe seen achieving high single-digit earnings growth.
Bonds have recovered impressively on yields and are viewed as appealing given corporate bond fundamentals. Investment grade is favored over high yield. US bonds offer a yield advantage but currency hedging costs need considering for non-US investors.
Alternatives like property and infrastructure are seen as providing portfolio balance. Real estate markets are expected to resume upward trends. Private markets may be interesting for circular economy solutions.
Commodities like oil, gold and copper are forecast to trade at moderately higher price levels. Oil is seen stabilizing around USD88/barrel on production cuts and demand recovery. Gold is viewed as a hedge.
Currencies are expected to see limited changes with EUR/USD around 1.10. A stronger yen may signal safe-haven flows requiring consideration for Japanese stocks.
Active risk management is recommended more than reluctance to invest given external risks. Equities have an important role but risks need monitoring. Bonds complete the investment universe with yields recovered.
Diversification across different risks is key as equity-bond correlations remain high. Alternatives can provide hedging through low correlation to stocks and bonds. ESG strategies may improve risk-return through sustainability themes.
Long-term investment themes
The report identifies 11 long-term investment themes grouped into resource transition, population support, and next-phase technology. These cover challenges around sustainable resource use, providing for a growing global population, and developing key technologies.
Specific themes include circular material use, sustainable food systems, energy transition, blue economy, healthcare, consumption megatrends, smart mobility, cybersecurity, artificial intelligence, digitization and infrastructure. Each theme outlines the opportunity and potential investment approaches, as well as risks.
In conclusion, the report takes a balanced view that active portfolio management will be important to navigate risks in 2024. It identifies areas of opportunity across asset classes and long-term investment themes focused on sustainability challenges.