Should Investors Chase the Bitcoin and Gold Rallies?
No. While recent developments may be a sign that bitcoin is gaining credibility, it remains a highly speculative investment that offers no cash flows.
Authored by: Sean Duffin
Super Tuesday Kicks 2024 US Election Cycle into Full Swing
Today many US states are concurrently holding primaries, which are critical for presidential hopefuls to secure delegates.
2024 Outlook: Public Equities
We expect global equity performance will be below its long-term median level, but we believe investors should hold equity allocations in line with policy targets. Within equities, we see opportunities in developed value, developed small caps, and China. We doubt European and emerging markets ex China equities will outperform, and we believe the share of active strategies that outperform will increase.
2024 Outlook: Currencies
We expect the US dollar and gold will more or less hold their values, given our economic expectation and the many geopolitical risks. We believe the yen will appreciate, and we expect the thawing crypto winter will fully transition to a spring.
Israel-Hamas War Highlights the Importance of Diversification
The devastating loss of life resulting from Hamas’s surprise attack on Israel is at the forefront of our concerns. Risk of a prolonged conflict in the region has grown, creating a new layer of uncertainty on many fronts, including the global economy and markets.
Does the Recent Rally in AI-Linked Growth Stocks Mean Value Is Doomed?
No. While the exciting developments in artificial intelligence (AI) have been a bright spot for equity markets this year, we do not think value will continue to lag growth. In fact, we expect it will outperform over the next several years.
Should Investors Continue to Overweight US Small Caps Despite Recent Banking Sector Stress and Growing Recession Fears?
Yes, investors should overweight US small-cap stocks, given valuations remain attractive and will provide a cushion if an expected recession unfolds.
The Business Cycle’s Impact on Asset Performance
Asset performance is highly sensitive to the global business cycle. In this chart book, we highlight the significant shifts in performance distributions across the global business cycle for major asset classes, including equity regions, styles, sectors as well as for fixed income, real asset and currencies. Ultimately, understanding the distributions of asset performance across business cycle stages and considering where the global economy is headed are key inputs in a rigorous investment decision-making framework.
Should Investors Lean Into Quality Equities?
Yes. Aggressive central bank tightening has caused economic growth to slow in Europe and the United States, and we expect that the recent banking sector stress will further weaken economic growth. Now is the time for investors to tactically overweight quality equities, given this style has tended to outperform broad equities during periods of economic contraction.
2023 Outlook: Currencies
We expect the US dollar to remain firm but with limited appreciation relative to 2022, given our view that it is near the end of its incredible multi-year run. We believe gold’s performance will improve and digital assets, in general, will not surpass prior highs, many of which were set in 2021.