CIO 2024 outlook: Skirting risks, harvesting yields

As inflation and growth dynamics vie with political risk for investor attention next year, we anticipate fresh volatility – and opportunity – in this higher-rate environment.

This has been yet another extraordinary year for investors – from the concentration of gains in a handful of stocks, to the rapid and synchronous rate hikes in developed economies, to the whiplash in bond markets. To assess the outlook for 2024, we clearly need to consider a large range of scenarios.

And yet we believe that almost regardless of how growth and inflation dynamics play out, investors should expect fresh volatility. As throughout 2023, outsized moves are likely, as market participants continue to recalibrate their expectations of monetary policy in light of new economic data.

Political risk will also need to be priced, and re-priced, with more than two fifths of humanity going to the polls. The US, EU and India are scheduled to hold elections; the UK may well follow suit. Taiwan’s presidential election – in which the country’s relationship with China will likely feature prominently – is set to take place in January.

In this outlook, teams from across LGIM assess the investment implications of this backdrop, while ever mindful of the need to be humble in their conclusions.