2024 Financial Outlook
For those of you who read my year-end messages I am back to my preferred approach of looking forward with this 2024 Financial Outlook as we believe we are edging closer to a point in time when markets will see beyond the negativity and, in advance of a recovery, will reprice asset values and we will all be rewarded for the investment risk we have shouldered in recent years.
In the world of investments, 2023 has proved to be a year of challenges, much like 2022. After nearly two years of central banks fighting inflation, I believe the outlook for 2024 very much depends on the balance between global economic growth and the stickiness of inflation.
Despite rising interest rates, the global economy has remained resilient, though indicators now suggest the global economy is entering a period of lower growth. Tight monetary policy, increasingly stretched consumers, and idiosyncratic growth shocks are all contributors to slower global growth.
We do anticipate volatility in risk assets as 2024 begins due to the ongoing global economic slowdown. More volatility may lie ahead, but markets have calmed from the high levels of distress seen in recent years. Higher interest rates will cause difficulties for companies and consumers, but economies go in cycles and we are due a recovery.
Questions remain over the path of inflation, however, in our view, the disinflation process will continue and growth will slow further in the first six months of 2024 (though this to some degree is already priced in to the markets) before starting to improve in the second half of the year. As inflation softens, we anticipate interest rate cuts and this will set the stage for a recovery, putting the global economy on a path to stronger growth accompanied by real wage growth in the second half of 2024.
Clearly, we must be conscious of geopolitical risks as recent events in the Middle East have raised risks of regional escalation that may impact oil and natural gas markets which would be inflationary. Other political risks range from the ongoing Russia-Ukraine war and US-China tensions over Taiwan.
We also have numerous elections, some with populists on the ticket with erratic agendas. That said our own general election will be characterised by two main parties whose manifestos are relatively centrist and although a lot of clients raise the election as a risk to portfolio values, my view is it provides a benign backdrop for the UK equity market.
In summary, while a recession is still possible in 2024, we believe that if it happens it will be a small ‘r’ recession. Consumers are still spending money and most people have a job. What happens to inflation remains pivotal, although it looks likely we are through the worst.
What next? Time will tell, but I, for one, am much more optimistic about 2024, touch wood…
As always, if you have any questions about your own personal finances do not hesitate to get in contact with your adviser. Alternatively, if you are new to financial planning and would like a free, no obligation consultation simply get in touch using the form below or call 01244 347 583 to speak to our team.
The content of this 2024 financial outlook is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice. If you’re unsure what’s right for your circumstances, ask for financial advice.
