Sectors
In this final note for the year, we take profits and close several long-term investment positions: Overweights in Insurance and Commercial Services, and underweights in Utilities, and Retail and Commercial REITs.
The statement from last week’s Central Economic Work Conference indicates that Chinese authorities are still not considering large-scale stimulus in 2024. Odds are that a full-fledged business cycle recovery in 2024 is unlikely. Chinese share prices remain vulnerable, and strengthening in the RMB will be short-lived.
The Republican Party’s odds of winning the 2024 election will benefit, if anything, from state courts’ attempts to exclude President Trump from primary or general election ballots. Higher odds of a change of ruling party will increase stock and bond market volatility.
Vietnamese stocks may not see an immediate rally as global manufacturing and exports remain weak. But investors with longer-term horizons should stay overweight this market.
Our recommendations for blogs and X’s (on the economy, financial markets, asset allocation, bonds, quants, energy, real estate, geopolitics, and specific countries and regions) to try over the holidays.
Explore the eight main themes that will drive the returns of European assets in 2024.
Our 2024 outlook can be encapsulated into just 39 words and three key views. Key view 1: The end of China’s housing boom means the end of the world’s main growth engine. Key view 2: If the Fed and ECB don’t kill the economy, they won’t kill inflation. Key view 3: The AI gold rush will struggle to find any gold. We go through the investment implications for the year ahead.
The Santa Claus rally is a repricing of the "soft landing" scenario as a likely economic outcome. Yet, many investors remain cautious, and harbor significant cash balances. Next year, repricing of various scenarios will continue, and volatility will be elevated. We remain in a "hard landing" camp and recommend defensive stance on a strategic investment horizon.
The recent decline in yields has powered European equities higher, however, this rally cannot last if earnings decline meaningfully. With this in mind, are our earnings models flagging risks for stocks next year?