Global Chief Investment Officer, HSBC Global Private Banking and Wealth
Navigating a complex world through quality assets and structural opportunities
The financial markets have experienced another eventful year, from the collapse of Silicon Valley Bank in the first quarter to the geopolitical conflict in the Middle East in October. Moreover, central banks’ aggressive rate hikes have sent bond yields to multi-year highs and made financial conditions more challenging.
As we look ahead to 2024, we see two positive drivers on the horizon. The number one challenge of rate hikes in major economies is finally fading away. The other positive is that the US economy appears to be heading for a soft landing, mitigating the risk of a global recession. These developments should allow financial markets to breathe a sigh of relief.
However, Europe is teetering on the brink of recession and China’s property sector will continue to weigh on global economic growth, while lingering geopolitical tensions and a busy election calendar in 2024 promise further bouts of market volatility. What should investors do in this complex environment?
Positioning for a mild acceleration of growth in the second half of 2024
Although global growth will be relatively slow, it remains positive with a full-year GDP growth forecast of 2.3% for 2024. In fact, we expect a mild acceleration in the second half of 2024 because falling inflation should help drive consumption, while the expectation of rate cuts led by the US in Q3 2024 should support investment and boost margins. What’s more, we see long-term structural trends turning into attractive opportunities.
Setting sail on the right course
Bond yields remain at attractive levels but tight financial conditions, slow growth and heightened geopolitical risks have led us to maintain our preference for high-quality bonds. What has changed from the last quarter is that government bonds of medium-to-long duration in developed markets look more attractive, as do Indian local currency bonds given their compelling yields, diversification benefits and India’s growth prospects.
In the equity market, we prefer quality large-cap companies because they can generally withstand higher rates and market uncertainty better. Earnings potential will become a key metric for stock selection. Geographically, the US offers solid fundamentals and structural opportunities, such as the re-industrialisation trend and rapid innovation. That should allow companies in the technology, industrials, consumer discretionary and healthcare sectors to surprise positively on earnings.
In Asia, growth momentum in India and Indonesia remains strong. In addition, we expect earnings in the Asian tech sector to bottom out soon, and South Korea should see a broad-based recovery in 2024 as the global tech cycle improves.
Sustainability remains an important theme for investors, especially with the UN Climate Change Conference (COP 28) turning the spotlight on the need for more global collaboration to address climate change. With ongoing investment in renewable energy and biodiversity, and continued improvement in ESG governance, companies that can take advantage of these developments will be well-placed for long-term outperformance.
A focus on quality and fundamentals has served us well in 2023 and we feel the same will be true going into next year. But we see many opportunities that we want to capture and believe that the beginning of the year is always a good time to review your portfolio. We hope our investment themes will help you achieve your investment and protection goals.
Best wishes for a successful investment journey in 2024.
1. Optimise bond returns with quality and duration
2. Focus on large-cap stocks with attractive earnings potential
3. Exploit opportunities from a broad range of sectors
4. Integrate sustainability to capture green potential
Regional market outlook
United States ↑
↓ Eurozone ↔ UK
↓ EM EMEA ↑ EM Latin America
Asia (ex Japan) ↑
Notes: The above comments reflects a 6-month view (relatively short-term) on asset classes for a tactical asset allocation. For a full listing of HSBC’s house view on asset classes and sectors, please refer to our Investment Monthly issued at the beginning of each month.
↑ “Overweight” implies a positive tilt towards the asset class, within the context of a well-diversified, typically multi-asset portfolio.
↓ “Underweight” implies a negative tilt towards the asset class, within the context of a well-diversified, typically multi-asset portfolio.
↔ “Neutral” implies neither a particularly negative nor a positive tilt towards the asset class, within the context of a well-diversified, typically multi-asset portfolio.
Key data to watch
We expect economic growth in the West should bottom in Q1, followed by a mild acceleration
Valuations look more attractive for 2024 across markets and sectors, which are positive for equities
Although growth is low by historical standards, we foresee better growth in H2
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