Equities
We expect US equity market concentration to loosen, and greater cyclical volatility and dispersion to provide more opportunities for active managers. Regional and market-cap valuation dislocations also present a potential roadmap for capturing upside. Japan, Europe, and emerging markets look attractive, as do macro- and rate-sensitive segments and sectors. We currently view the most attractive potential investments as a barbell, with quality compounders on one end and more heavily discounted macro- and rate-sensitive sectors and regions on the other.
As economic conditions stabilize and rates and inflation moderate, one market segment that has room to run in 2024 is small-cap stocks. Small caps currently trade at extreme valuation discounts to large caps, particularly in the US.
Commodities
Our commodities investors believe that this market segment offers a compelling structural investment opportunity owing to the confluence of a number of factors including low inventories, attractive roll yields, mid-single-digit collateral returns, and rising production costs. Amid a regime of higher interest rates and moderate inflation, we believe future commodities corrections may be related to a weakening macro environment and should be viewed as buying opportunities. When macro concerns recede, prices have the potential to snap back given the absence of the typical cushion from inventories and spare capacity.
Multi Asset
Three themes are top of mind for our multi-asset team: opportunities in today’s higher-yielding world, managing equity market concentration and risk, and the link between resilience and innovation. In reference to the latter, in a world of more frequent and less predictable economic cycles, an allocation to thematic investments has other benefits beyond exposure to innovation. Thematic allocations could also help increase diversification given how much cyclical return is typically found in portfolios. The team provides views on global asset allocation both at a high level and with certain countries, regions and sectors within markets.
Equity Market Outlook
In our Equity Market Outlook, we offer a range of fundamental, factor, and sector insights.
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