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Nanette Abuhoff Jacobson, Managing Director and Multi-Asset Strategist at Wellington Management and Global Investment Strategist for Hartford Funds
Supriya Menon, Multi-Asset Strategist at Wellington Management
Alex King, CFA, Investment Strategy Analyst at Wellington Management
Markets seem to expect a much smoother ride in 2024, but they may be too optimistic.
“The recession that wasn’t” may be the best way to describe 2023 and the year’s strong market performance. The Fed’s tightening cycle did wreak havoc in parts of the market, most notably among US regional banks, but strong consumption and artificial-intelligence excitement were underappreciated offsets. While this outcome was a relief, the market dominance of the “Magnificent Seven” stocks left many allocators disappointed with their portfolio results.
John Butler, Macro Strategist at Wellington Management
Eoin O'Callaghan, Global Bond Strategist at Wellington Management
A turbulent forecast: Mild recessions, slow growth, stubborn inflation, and continued volatility.
The nature of economic cycles is changing. We expect domestic output gaps to be far more important in determining inflation in a particular economy than we have seen over the past 20 years of globalization. Markets and central banks may take time to adjust to this new normal, but the result may be shorter and more frequent cycles, accompanied by more volatile and, on average, higher inflation.
The US Economy: A Tale of Transition
Juhi Dhawan, PhD, Macro Strategist at Wellington Management
My base case for the US economy in 2024 is slower nominal growth and policy normalization.
In the upcoming year, there are a variety of risks to watch for, including monetary policy taking a bite out of growth, a maturing business cycle leading to credit deterioration, and geopolitical turmoil driving heightened economic uncertainty. In this context, efforts by corporate America to cut costs and boost productivity could be important offsets. In the coming year, the Federal Reserve (Fed) will slowly reward an improving core inflation backdrop, and US elections will merit attention given the large prevailing fiscal deficits.
Macro Implications of the AI Revolution: Is the Market Right?
John Butler, Macro Strategist at Wellington Management
The market is already anticipating the impact of AI, but many questions still remain unclear.
In my view, advances in artificial intelligence (AI) could alter the macro environment meaningfully by raising both expectations and growth trends of long-term real interest rates, but by how much and when is less clear. I set out an initial framework to help answer those questions within the context of deglobalization and demographic change.
The Intersection of Geopolitics and Deglobalization
Thomas Mucha, Geopolitical Strategist at Wellington Management
A fracturing of the global order will create risks and opportunities for investors.
As the devastating conflict and humanitarian catastrophe in the Middle East once again underscores, we find ourselves in the most complex, dangerous, and unpredictable geopolitical environment in decades. What do investors need to know while navigating the investment landscape?
Alex Tedder, Head of Global & Thematic Equities at Schroders Investment Management
The mega-themes reshaping the world economy may provide opportunities and risks for investors in equities.
A confluence of factors, associated with what we’ve called the 3D reset, is driving a regime shift of major proportions. Structural challenges that were already apparent before the pandemic are becoming acute.
3D Reset and Emerging Markets: Risks and Opportunities
Tom Wilson, Head of Emerging Market Equities at Schroders Investment Management
While emerging markets have faced a tough decade, the 3D reset may now be paving the way for new opportunities.
Emerging markets (EM) enjoyed a turbocharged period of growth during the 2000s, led by China. It was a decade of globalization, urbanization, the commodity “super cycle,” and a rising middle class. Manufacturing, commodities, and consumption all benefited strongly.
Rates: Tracking the Trade-Off Between Inflation and Growth
Amar Reganti, Managing Director at Wellington Management and Fixed-Income Strategist for Hartford Funds
Marco Giordano, Investment Director at Wellington Management
While an economic soft landing now seems likely, inflation and recession risks still remain.
Inflation appears to be cooling globally, with the multi-decade-high reads of 2022 now firmly in the rearview mirror. While there could, of course, be upside surprises such as commodities shocks, idiosyncratic events, or prolonged consumer resilience, we believe global inflation is trending firmly downward. Now central banks and markets must navigate a treacherous trade-off between inflation and growth.
2024: Fixed Income in the Age of the 3D Reset
Julien Houdain, Head of Global Unconstrained Fixed Income at Schroders Investment Management
Lisa Hornby, Head of US Multi-Sector Fixed Income at Schroders Investment Management
Abdallah Guezour, Head of Emerging Market Debt and Commodities at Schroders Investment Management
After the bear market in bonds, investors could be forgiven for giving up on the asset class. That could be a mistake.
No investors have felt the economic regime shift of the past three years more keenly than those in fixed-income markets. Returns have been sobering: US Treasuries have posted their worst loss since the US ratified its constitution in 1787. However, such performance has also created opportunity. Despite inflation being more elevated than during the previous decade, yields on higher-quality bonds now stand at their highest levels in 15 years. This not only makes them look cheap in absolute terms but also in relative terms compared to other asset classes, particularly equities.
-
Global Macro
Nanette Abuhoff Jacobson, Managing Director and Multi-Asset Strategist at Wellington Management and Global Investment Strategist for Hartford Funds
Supriya Menon, Multi-Asset Strategist at Wellington ManagementAlex King, CFA, Investment Strategy Analyst at Wellington Management
Markets seem to expect a much smoother ride in 2024, but they may be too optimistic.
“The recession that wasn’t” may be the best way to describe 2023 and the year’s strong market performance. The Fed’s tightening cycle did wreak havoc in parts of the market, most notably among US regional banks, but strong consumption and artificial-intelligence excitement were underappreciated offsets. While this outcome was a relief, the market dominance of the “Magnificent Seven” stocks left many allocators disappointed with their portfolio results.
John Butler, Macro Strategist at Wellington Management
Eoin O'Callaghan, Global Bond Strategist at Wellington ManagementA turbulent forecast: Mild recessions, slow growth, stubborn inflation, and continued volatility.
The nature of economic cycles is changing. We expect domestic output gaps to be far more important in determining inflation in a particular economy than we have seen over the past 20 years of globalization. Markets and central banks may take time to adjust to this new normal, but the result may be shorter and more frequent cycles, accompanied by more volatile and, on average, higher inflation.
The US Economy: A Tale of Transition
Juhi Dhawan, PhD, Macro Strategist at Wellington Management
My base case for the US economy in 2024 is slower nominal growth and policy normalization.
In the upcoming year, there are a variety of risks to watch for, including monetary policy taking a bite out of growth, a maturing business cycle leading to credit deterioration, and geopolitical turmoil driving heightened economic uncertainty. In this context, efforts by corporate America to cut costs and boost productivity could be important offsets. In the coming year, the Federal Reserve (Fed) will slowly reward an improving core inflation backdrop, and US elections will merit attention given the large prevailing fiscal deficits.
Macro Implications of the AI Revolution: Is the Market Right?
John Butler, Macro Strategist at Wellington Management
The market is already anticipating the impact of AI, but many questions still remain unclear.
In my view, advances in artificial intelligence (AI) could alter the macro environment meaningfully by raising both expectations and growth trends of long-term real interest rates, but by how much and when is less clear. I set out an initial framework to help answer those questions within the context of deglobalization and demographic change.
The Intersection of Geopolitics and Deglobalization
Thomas Mucha, Geopolitical Strategist at Wellington Management
A fracturing of the global order will create risks and opportunities for investors.
As the devastating conflict and humanitarian catastrophe in the Middle East once again underscores, we find ourselves in the most complex, dangerous, and unpredictable geopolitical environment in decades. What do investors need to know while navigating the investment landscape?
-
Equities
Alex Tedder, Head of Global & Thematic Equities at Schroders Investment Management
The mega-themes reshaping the world economy may provide opportunities and risks for investors in equities.
A confluence of factors, associated with what we’ve called the 3D reset, is driving a regime shift of major proportions. Structural challenges that were already apparent before the pandemic are becoming acute.
3D Reset and Emerging Markets: Risks and Opportunities
Tom Wilson, Head of Emerging Market Equities at Schroders Investment Management
While emerging markets have faced a tough decade, the 3D reset may now be paving the way for new opportunities.
Emerging markets (EM) enjoyed a turbocharged period of growth during the 2000s, led by China. It was a decade of globalization, urbanization, the commodity “super cycle,” and a rising middle class. Manufacturing, commodities, and consumption all benefited strongly.
-
Fixed Income
Rates: Tracking the Trade-Off Between Inflation and Growth
Amar Reganti, Managing Director at Wellington Management and Fixed-Income Strategist for Hartford Funds
Marco Giordano, Investment Director at Wellington Management
While an economic soft landing now seems likely, inflation and recession risks still remain.
Inflation appears to be cooling globally, with the multi-decade-high reads of 2022 now firmly in the rearview mirror. While there could, of course, be upside surprises such as commodities shocks, idiosyncratic events, or prolonged consumer resilience, we believe global inflation is trending firmly downward. Now central banks and markets must navigate a treacherous trade-off between inflation and growth.
2024: Fixed Income in the Age of the 3D Reset
Julien Houdain, Head of Global Unconstrained Fixed Income at Schroders Investment Management
Lisa Hornby, Head of US Multi-Sector Fixed Income at Schroders Investment Management
Abdallah Guezour, Head of Emerging Market Debt and Commodities at Schroders Investment Management
After the bear market in bonds, investors could be forgiven for giving up on the asset class. That could be a mistake.
No investors have felt the economic regime shift of the past three years more keenly than those in fixed-income markets. Returns have been sobering: US Treasuries have posted their worst loss since the US ratified its constitution in 1787. However, such performance has also created opportunity. Despite inflation being more elevated than during the previous decade, yields on higher-quality bonds now stand at their highest levels in 15 years. This not only makes them look cheap in absolute terms but also in relative terms compared to other asset classes, particularly equities.
Download the PDF to read all of our 2024 outlooks.
Important Risks: Investing involves risk, including the possible loss of principal. • Foreign investments may be more volatile and less liquid than US investments and are subject to the risk of currency fluctuations and adverse political, economic, and regulatory developments. These risks may be greater, and include additional risks for investments in emerging markets. • Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall. • Investments in the commodities market may increase liquidity risk, volatility and risk of loss if adverse developments occur. • Investments linked to prices of commodities may be considered speculative. Significant exposure to commodities may subject investors to greater volatility than traditional investments.
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