SUISSE News Winter 2023
Banking / Financial
December 2023
UBS’s Chief Investment Office sees us entering “a new world” in 2024. With uncertainties set to persist in both the economic and geopolitical spheres, investors should focus on quality, get in balance, and stay disciplined yet agile. Looking at the decade ahead, there are opportunities to capture growth in leaders from disruption, including generative AI, and in private markets.
In the Year Ahead 2024, UBS Global Wealth Management’s (GWM) award winning Chief Investment Office (CIO) outlines what investors should expect as they enter, what it set out to be, “a new world”. According to the report, this new world – defined by economic uncertainty and geopolitical instability, but also profound technological change – leads to three key conclusions for the year ahead.
First, 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. Second, central banks are expected to start their rate-cutting cycles next year. And finally, politics will have an outsized role in 2024, with the upcoming US elections, and ongoing geopolitical tensions and wars.
With that in mind, the report’s core recommendations for the year ahead include:
- 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.
Mark Haefele, Chief Investment Officer at UBS GWM, says: ”We see 2024 mark the beginning of a new world. And while it can be easy to feel a sense of trepidation when faced with new challenges, years of adversity reinforce three things in terms of investing – the value of global diversification, the virtue of patience, and, most important, the resilience of humankind.”
