Macquarie Asset Management has today published its Outlook 2024, providing perspectives on the themes set to influence the investment landscape and performance of key asset classes for the year ahead.
In Outlook 2024, Macquarie Asset Management outlines its expectations that global growth will be more challenged in the year ahead as high interest rates and tighter credit conditions increasingly slow economic activity.
2023 saw improvements for investors versus the previous year, with US equities (S&P 500® Index) returning 11.5% year to date, while bonds (10-year Treasuries) have returned -5.4%.1 By comparison, both asset classes returned -15.0% in 2022. Notwithstanding the improvement in returns this year, in Macquarie Asset Management’s view cyclical headwinds remain for investors to navigate.
The US remained resilient in the face of the sharpest tightening of monetary policy in 40 years, but key leading indicators – such as the yield curve, monetary aggregates, and credit conditions – suggest the risk of a slowdown in growth, or even a recession, remains. Beyond the US, the Euro area and UK economies are already on the cusp of recessions as the headwinds from tighter monetary policy intensify at the same time as headwinds from higher energy prices are fading. For China, Macquarie Asset Management expects that while some recovery in domestic demand in 2024 seems likely, the policy constraints mean the recovery may not be robust, with GDP growth expected in the 3-5% range.
Ben Way, Group Head of Macquarie Asset Management, said: “In our experience, volatility and uncertainty – while not necessarily welcome – can create opportunities. While we acknowledge the challenges of the current environment, we take a nuanced view across markets and asset classes and remain optimistic when it comes to our ability to find near-term opportunities for investors.”
Global Listed Equity Markets: Searching for value amidst market volatility
Macquarie Asset Management expects listed equities to face headwinds from the more volatile economic backdrop and the fact that bonds have become a worthwhile alternative again. While US large-cap stock valuations look stretched, the firm sees opportunities in US small-caps and listed real assets. Outside of the US, European equities may look increasingly attractive to investors on valuation grounds.
Global Debt and Credit Markets: Patience may be rewarded in 2024
With inflation falling, GDP growth slowing, central banks pausing, and not much priced in in terms of interest rate cuts over the coming 12 months, Macquarie Asset Management sees bonds as good value. Credit spreads are not at levels consistent with recessionary conditions, however, so the team prefers bonds at the low-risk end of the spectrum. In the US, Macquarie Asset Management believes municipal bonds and agency mortgage-backed securities also offer a good risk-adjusted return proposition.
Real Assets: Cyclical challenges, but positive longer-term drivers
In real assets, infrastructure’s defensive characteristics, its ability to protect against surges in inflation, and its relatively high yields are all traits investors are likely to find attractive in the macroeconomic environment the firm expects to prevail in 2024. It also has a high exposure to secular growth trends, such as the energy transition and digitalisation. Following two challenging years, real estate’s pricing reset is expected to create opportunities, particularly in the rental housing and logistics sectors, which are supported by stronger demand drivers and pullback in new supply. The office sector continues to face headwinds from working-from-home practices, but repurposing and repositioning opportunities could emerge in 2024 as pricing adjusts below replacement costs.
Access Outlook 2024
To explore these insights and more in detail, please access the full report here.
1. Average for the month to 15 November 2023 over the month average for December 2022.
The information presented has been prepared for general informational purposes by Macquarie Asset Management (MAM), the asset management business of Macquarie Group (Macquarie) and is not a product of the Macquarie Research Department. This media release reflects the views of MAM and statements in it may differ from the views of other Macquarie divisions or groups, including Macquarie Research. This media release has not been prepared to comply with requirements designed to promote the independence of investment research and is accordingly not subject to any prohibition on dealing ahead of the dissemination of investment research. Nothing in this media release shall be construed as a solicitation to buy or sell any security or other product, or to engage in or refrain from engaging in any transaction.
