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Quarterly Macro

Three themes for Q1 2024


[00:00:04.49] Hi, I'm Karim

[00:00:05.57] and I'm going to talk to you about our 2024 outlook. Slowing economic growth and higher for longer interest rates in many markets may appear a challenge still as we turn to 2024. Yet we see this as a time of opportunity across stocks and bonds with three key themes shaping markets in 2024.

[00:00:26.24] Firstly, although we believe that next year we'll see continuing instability in the macroeconomic environment given the uncertain paths ahead for both economic growth and inflation, we think there's more room to gain from getting invested than keeping savings in cash. We'll be looking to put money to work by investing in specific sectors, style factors, these are groups of companies that tend to have similar characteristics, and regions that look well positioned in the current environment, either because their asset price is attractive or because they have solid balance sheets.

[00:01:02.93] Secondly, we look to manage macroeconomic risk. We have seen market narratives heavily focused on whether a recession will take place. But we don't think this is the right framing, because it is not a typical business cycle, given the big structural changes to global economies since the COVID-19 pandemic with lower economic growth, higher inflation and higher interest rates. In a high interest rate environment, we see a generational opportunity for investors to gain income through bonds.

[00:01:34.32] Thirdly, we focus on harnessing mega forces. These are long term structural drivers at play in the new economic regime, such as artificial intelligence, which has already shaped markets this year. I'm now joined by Varia from our portfolio consulting team, and she will talk to you about what these themes mean for portfolios.

[00:01:55.81] Thanks, Karim. Firstly, against this backdrop, we believe it's crucial for long term investors to stay invested in broad stock market exposures, because predicting the timing of a recovery is very challenging. There are also opportunities in being selective. For example, we think energy stands out as a profitable sector as higher oil prices may mean higher earnings for energy companies.

[00:02:18.03] Secondly, to navigate economic risks, investors may look to assets that can help boost portfolio resilience or those that have historically helped investors to yield relatively stable returns through varied economic conditions. For this, we look to government bonds, where investors can lock in yields that are currently at decade highs.

[00:02:37.44] Thirdly, another way we look to get selective is by harnessing long term mega forces that are impacting investing now and will impact it in the future, such as machine learning and artificial intelligence. Today we think the best way to access the artificial intelligence (AI) theme is through exposure to the semiconductors that power AI technology. Thank you for joining and read our 2024 Outlook for more.

Discover our key themes and Outlook for Q1 2024

Karim Chedid, Head of EMEA iShares Investment strategy and Varia Pechurina, Portfolio Consultant, break down our key themes for Q1 2024

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View from the summit

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