UBS Global Wealth Management’s outlook and advice for 2024, which will be “a new world”:
- will be defined by economic uncertainty and geopolitical instability, but also profound technological change
And will lead to three key conclusions:
- the strength of the US economy in 2023 is likely to give way to slower, though still positive, growth in 2024, while European growth should remain subdued, and China enters a “new normal” of lower, but potentially higher quality growth
- central banks are expected to start their rate-cutting cycles next year
- politics will have an outsized role in 2024, with the upcoming US elections, and ongoing geopolitical tensions and wars.
Core recommendations for the year ahead:
- Manage liquidity. With interest rates expected to fall in 2024, investors should consider limiting overall cash balances and take opportunities to optimize yields, using fixed term deposits, bond ladders, and structured solutions.
- Buy quality. Quality bonds should deliver both yield and capital appreciation, while stocks with stable balance sheets and sustainable profit margins are likely best positioned to generate earnings despite weaker economic growth.
- Trade the range in currencies and commodities. With the USD expected to remain well supported around current levels, and oil prices to trade in a USD 90–100/bbl band, yield generation strategies, or strategies that enable investors to systematically buy currencies below current levels offer opportunity.
- Hedge market risks. Geopolitical uncertainty means investors need to prepare for volatility ahead. In addition to diversification, investors can further insulate portfolios against specific risks through capital preservation strategies, using alternatives, or with positions in oil and gold.
- Diversify with alternative credit. The backdrop of lower interest rates and elevated price and spread volatility caused by high global debt balances is supportive for various credit strategies including credit arbitrage and distressed debt.
