Through the uncharted waters of 2024

In 2024, investors are bracing themselves for what appears to be a turbulent period characterised by a convergence of significant challenges.

Chris Holdsworth, Investec Wealth & Investment’s Chief Investment Strategist, foresees a landscape fraught with uncertainty, driven by a confluence of factors on both the global and domestic fronts. 

He believes that 2024 is likely to be a challenging year for several reasons. 

Elevated uncertainty

“There are a range of elections coming up across the globe, leading to greater fiscal policy uncertainty. Geopolitical tension and conflict have increased, leading to greater uncertainty concerning energy prices and the flow of global trade. Inflation is decreasing slower than the consensus forecast – increasing monetary policy uncertainty,” he said. 

Despite elevated uncertainty, Holdsworth said volatility is low, investment-grade credit spreads are tight, and the US market is expensive. It seems set up for a volatile year ahead. 

Some key trends

Holdsworth's insights on key themes, trends, or developments likely to emerge in 2024 and beyond, include the impact of Artificial Intelligence (AI), the energy transition theme, and demographic shifts on margins, competition, interest rates, and asset class returns. 

When looking at key themes, trends, or developments likely to emerge in 2024 or that the industry should be aware of, Holdsworth said that aside from the above, the obvious one is Artificial Intelligence (AI). 

The question is, will it enable margins to persist at current elevated levels or will it allow more competition as barriers are eroded leading to lower margins, and a weaker market? 

“Looking at other key themes, the energy transition theme is likely to have legs for the next decade at least. The investment required to mitigate the effects of climate change will have implications for interest rates and markets more broadly. When it comes to demographics, ageing populations across the globe will also have material consequences for asset class returns,” he said. 

Three emerging risks

The top three emerging risks facing the industry, according to Holdsworth, include the rise of passives, where the increasing dominance of passive investment vehicles in equity and bond markets raises concerns about potential distortions. Delisting presents another challenge as many countries experience a decline in the number of shares listed on local exchanges, necessitating the expansion of private equity offerings to compensate for the shrinking options. 

“Additionally, structurally low volatility poses a significant risk, as some believe that equity volatility is being artificially suppressed by flows into certain structured products. This results in prolonged periods of market calm followed by sudden shocks, with "flash crashes" expected to become a more permanent feature of market returns. Navigating these emerging risks will require industry stakeholders to adopt proactive strategies aimed at identifying and mitigating the potential impacts of these trends on market stability and investor confidence,” he continued. 

Navigating through the uncertainties

In his concluding remarks, Holdsworth said that 2024 is anticipated to be a year filled with challenges.

“To navigate through the uncertainties ahead, it will be essential to leverage a diverse array of financial products. This includes tapping into private equity, structured products, and traditional asset classes. By utilising the full spectrum of available resources, we can better position ourselves to address the complexities and obstacles that may arise throughout the year.”

As we chart our course through the uncharted waters of 2024, Holdsworth's insights underscore the imperative of adaptability and resourcefulness in confronting the multifaceted challenges ahead. By embracing a diverse array of financial instruments and strategies, we fortify our resilience and readiness to navigate the complexities of the ever-evolving market terrain.

Writer’s Thoughts

In the face of the intricate web of challenges forecasted for 2024, one thing remains clear: adaptability and resilience are indispensable virtues for investors. As we traverse the uncharted waters of this turbulent period, it's crucial to remain agile, leveraging a diverse toolkit of financial instruments and strategies. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me - myra@fanews.co.za