Current Situation Assessment - 1st quarter 2024
Our short-term assessment of developments on the financial markets.
Review - 4rd quarter 2023
After a difficult start to 2023, the global economic situation has steadily improved in recent months, as we expected. Full employment in the industrialised countries proved to be the foundation of this development.
Compared to the US, the economic recovery in Europe started later following a more pronounced and prolonged economic downturn. This was due to high energy prices and only moderate fiscal policy support measures. The situation was different in the USA, where the initial economic downturn was counteracted by high government spending.
The overall improvement in the economic situation and higher US government debt led to a significant rise in interest rates in the third quarter. The associated risks, such as higher financing costs for governments, companies and private households, unsettled investors. The first signs of a possible economic slowdown in the US and the continuing weakening of inflation figures led to a downward adjustment in market interest rates again in the fourth quarter of 2023.
The global bond and equity markets benefited equally from the prospect of the first interest rate cuts by central banks in 2024. The gains varied in intensity and breadth. The positive performance of the US equity market was primarily driven by the seven major technology stocks.
Outlook
We assume that the global economy will continue to develop positively in the first half of 2024. We do not expect global economic growth to weaken until the next peak in the economic cycle is reached in the second half of 2024.
As inflation figures approach the target of two per cent, central banks will have room to cut interest rates. We expect short-term interest rates to fall further over the course of 2024, while long-term interest rates will rise slightly. In this scenario, the recovery in bonds in the Colin&Cie mandates should receive further support given our positioning with short residual maturities.
After a good year for equities in 2023, we expect equity earnings to normalise in 2024. Due to a weakening of the economic environment in the second half of 2024, volatility should increase. There are no signs of a turnaround in commodity prices following a further decline in the fourth quarter of 2023. Gold will become less attractive as long-term interest rates rise. Both asset classes therefore remain underweighted in our allocation.
Our selection of alternative investments has helped to stabilise the portfolios over the past eight years and significantly improved the result. Due to the ongoing risks and an expected increase in volatility, particularly in the second half of 2024, risk diversification with alternative investments continues to make sense.
Disclaimer - legal notice
This publication was produced by the Investment Office of the Colin&Cie Group. The information and opinions contained in this document are based on sources we believe to be reliable. However, we cannot guarantee the reliability, completeness or correctness of these sources. All information and quoted rates are only up-to-date at the time of this publication and are subject to change at any time without notice. The content is based on numerous assumptions made by the Colin & Cie Group. It should be noted that different assumptions can lead to materially different results. The forecasts and assessments are only current at the time this publication is prepared and can change at any time without prior notice. Past performance of an investment is not a guarantee of future results. Certain investments can experience sudden and substantial losses in value. This information and views do not constitute a solicitation, offer or recommendation to buy or sell investment instruments or to carry out any other transactions. We recommend interested investors to consult their personal advisor before making decisions on the basis of this document so that personal investment goals, financial situation, individual needs and risk profile as well as further information can be duly taken into account as part of a comprehensive consultation. The information contained in this publication is marketing material that is distributed for advertising purposes only.
