ESGB - 2024 Midyear Investment Directions

2024-07-10 10:05:00 ET

Summary

• We upgrade our macroeconomic outlook based on continued strength in the U.S. economy, but remain cautious on still high inflation.
• Our expectation for just two rate cuts leaves us committed to quality for the rest of the year, but pockets of opportunity suggest reasons for greater risk-taking.
• A combination of high dispersion within asset classes, rising correlation between stocks and bonds, and election uncertainty means investors may want to consider relying on the experience and expertise of active managers to identify investible opportunities in the second half of 2024.

Positioning For Fundamental Transformation

We believe a seismic structural transformation is underway, with the potential to reshape the investment landscape. It's being driven by a potential surge in capital spending on artificial intelligence ((AI)), rewiring of global supply chains and the low-carbon transition.

However, the speed, size and impact of that investment remains uncertain, and comes against an unusual economic backdrop. We lean into the transformation and look to adapt as the outlook changes, with a more nimble, granular approach to identifying investment opportunities.

Investment Directions is our quarterly guide to meet this challenge, designed to help navigate opportunities in equities, fixed income, and international markets for H2 2024, with implementation ideas across index and active strategies. We remain bullish on AI, and see opportunity in the massive infrastructure investment - and energy - needed to fuel its expansion.

On a tactical horizon, we see AI winners continuing to drive equities - despite recent tech-led volatility - yet turbulence in macro data is likely to keep dispersion and volatility high. We see scope for uncertainty to persist as markets digest election results around the globe, and we approach the final straight to November's U.S. vote....

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