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Quarterly Macro

Three themes for Q1 2024

Welcome to Around the World. Spotlight on our 2024 outlook.

We see elevated volatility persisting in the new year, leading to higher dispersion of returns. Yet we see this as a time of opportunity and look to put the cash on the sidelines back to work. And I believe selectivity, agility and scale will be key to identifying opportunities and achieving alpha.

I'm joined today by Ann-Katrin Petersen, Senior Investment Strategist for the BlackRock Investment Institute, who will discuss our new investment themes for 2024. I'll then look at what these themes mean for investors portfolios. 

Thanks, Karim.

We see a real opportunity to take advantage of greater volatility in the new regime this year. Our first investment theme for 2024 looks at managing macro risks.

Growth across major economies has been slower than before the pandemic and interest rates much higher. We believe that markets have started adjusting to this new reality and we seek out mispricing as they do.

Our second theme really focuses on the idea that investors need to take a more active approach to their portfolios and be deliberate about any macro exposures.

The reality is that dispersion of returns and volatility create space for investment skill to shine, and we see a huge opportunity to make lemonade out of the macro lemons and put more money to work.

This involves being both dynamic and selective with index and alpha seeking strategies, and one way to do that is theme three harnessing mega forces. These are big structural forces in the global economy and market structure.

Markets are typically slow at pricing those mega forces making for abundant investment opportunities. We see megaforces driving returns now and in the future and they also serve as important portfolio building blocks on their own.

Thanks Ann-Katrin.

So how can we implement these themes in portfolios?

We're managing macro risk through a whole portfolio approach.

Looking back to bonds for income and ballast we see an opportunity to lock in yields at decade-highs with fixed-maturity bonds. We remain overweight short-dated U.S. Treasuries and we favor duration in Europe.

We turn to alternatives and private markets for diversification, and we look to size cash sleeves appropriately for the environment ahead. As we believe the record level of cash on the sidelines is somewhat unwarranted. We follow two approaches to put money back to work, either through attractive valuations or through seeking quality.

For example, we see good value in developed markets (DM) sectors like energy and European banks, and we also see opportunity in Japanese equities as resurgent inflation and wage growth translate into better pricing power for Japanese companies.

Finally, we're harnessing megaforces through exposure to their catalysts and their beneficiaries. We expect that AI (artificial intelligence) will continue to shape markets in 2024. We see the strongest opportunity set today in semiconductors, and we look to alpha strategies to identify the next generation of AI breakthroughs.

With more people set to vote in 2024 than in any year in history. The geopolitical fragmentation megaforce is also in focus. We see an acceleration in the rewiring of global supply chains through reshoring and nearshoring, and we expect sectors like industrials and materials to benefit from this.

Read our views and our implementation ideas across asset classes at the link below.

And thank you for joining.

Discover our key themes and Outlook for Q1 2024

Karim Chedid, Head of EMEA iShares Investment Strategy and Ann-Katrin Petersen, Senior Investment Strategist and Director with the BlackRock Investment Institute (BII), break down our key themes and Outlook for Q1 2024.