If the consensus on Wall Street is often wrong — and evidence from 2023 does little to dispel that notion — then in the year ahead investors are facing either the mother of all rallies or a selloff for the ages.
That’s because most investment outlooks from major banks, advisers and asset managers envisage the same middle-of-the-road scenario in 2024: They see interest rates finally starting to bite, a benign economic slowdown, and a central bank pivot to easier policies setting the stage for a late-year rebound. Stocks and bonds — which rallied strongly in the final weeks of 2023 — are mostly seen posting positive yet underwhelming gains.
It’s not the only outcome laid out in the more-than 650 calls assembled here by Bloomberg News, but it is the predominant view. Amundi, JPMorgan Asset Management and Vanguard are among those predicting “mild” recessions. To BNY Mellon Wealth Management it will be “a healthy and welcome slowdown.” Barclays calls it a “soft-ish” landing.
Against that backdrop, most firms stress the need to seek out quality in stocks, diversify across sectors and regions, and seize upon some of the best yields in the fixed-income space in recent memory.
Yes, according to some it’s the year of the bond — again. With rates elevated and cuts on the horizon, fixed income looks ripe both for capital appreciation and yield harvesting, says JPMorgan Asset. “Tilt to fixed income,” says Franklin Templeton. “Bonds have their moment,” BNY Mellon Wealth proclaims.
The obvious problem: That was also what pretty much everyone predicted last year. Yet Wall Street got it horribly, famously wrong in 2023 as bonds plunged for months in the face of relentless rate hikes and stocks surged in the grip of an AI frenzy.
So strategists are going from one of their most humbling years into surely one of their most testing. The next 12 months are set to determine the endgame in the battle against runaway inflation, the fate of the current business cycle, and the political leadership of half the global economy, to name just a few. Perhaps that’s why so many of the forecasts are so cautious — few want to make a big call in such a delicate year.
So what of the outliers? On balance, they lean bearish, chiming with the fact that most firms see risks skewed to the downside. Robeco warns current consensus is nothing more than a “fairy tale.” BCA Research reckons the macro picture is more troubling now that it was 12 months ago. Deutsche Bank is braced for a hard US landing.
But there are a few bulls. UBS Asset Management says if its base case soft landing is achieved, “global equities will comfortably ascend to new all-time highs in 2024.” Commonwealth Financial Network expects a Goldilocks economy to offer an “ideal state” for financial markets.
One thing pretty much everyone agrees on: The US election is impossible to call. Many firms like Citi and HSBC say it’s just too early, others simply warn to expect volatility. Kudos to UBS, therefore, for sketching a specific potential scenario: a Trump-Biden deadlock, with a third party candidate holding the balance, or the decision even heading to the House of Representatives.
Here’s what the finance world’s best and brightest see in the year ahead.