Market Review 2024

As the global economy recovers from the pandemic and inflation (now stagflation) makes its grueling return, not seen since the 1970s, the world is preparing to face its greatest ever challenges: the energy transition to fight the climate crisis and the development of an inclusive growth model. Fact: 2024 will be a pivotal year in this respect, encompassing a huge mobilisation of resources to succeed in both of these challenges. Meanwhile, some of the paradigms that have characterised the previous decade will appear outdated.

The paradigm of austerity at all costs is a thing of the past, and not only as a response to the Covid-crisis disruptions. Huge fiscal stimulus, along with private capital, is crucial for the ambitious investment needed to reach Net Zero emission targets by 2050 and to manage the transition. The energy crisis we are living in today is adding more fragility to an already unequal society, and governments need to act. Central Banks’ independence will come into question, while dealing with multiple targets (inflation, stagflation, growth, unemployment, green, inequality). The mantra of 'overcapacity' is also debunked as scarcity is all around: commodities (food and energy), a skilled workforce and alternative supply chains to mention a few. This comes alongside the end to the old wave of globalisation and the emergence of China as global power although let us face it, it has always been the 'super power' (in terms of consumer demand, climate action, geopolitical equilibria).

All this translates into three major themes for investors in 2024: first, inflation, at a time when economic growth starts to slowdown; second, the de-synchronisation of fiscal and monetary policies across the world, along with the impacts of the slowdown in China; third an acceleration of ESG integration into portfolios. Initiam Capital will help you rethink your portfolios, and to explore the opportunities that will arise in this new investment regime.

Wild fluctuations in the pricing of stock markets driven by shifts in risk aversion sentiment, coupled with evidence that the Federal Reserve actually played a role in this volatility via a series of announcements outlining unprecedented steps to provide several trillion dollars in loans to support the economy have seemed to kept the global economy afloat, but has it run out of steam?

Whilst the pandemic has exacerbated vulnerabilities of global supply chains and added impetus to geopolitical fragmentation, the stresses on the global economy are paving the way for investment opportunities not seen since the great depression of 1929 with over inflated parent market indices and a 'generational' opening for gains from the impending short, which we are now firming in the midst of.

Whilst the investment world has changed and potentially led investors to remove themselves from the coal face for fear of unimaginable volatility and increased risk, the Initiam Capital investment and analysis team have reflected this within their strategic mid-term forecasts and how these will affect the long-term investment implications.

What is apparent is that one of the most important actions professional investors face today is the need to review their financial investment vehicles, the subsequent jurisdictions they are based in and the creditworthiness of those institutions and ironically keeping asset allocation a closely monitored secondary concern.

Key points for investment consideration:

Firstly, with central banks committing to keep interest rates low or in some circumstances negative this enables unprecedented room for fiscal expansion. Combined with the risk of continual supply downturn, this raises the potential for higher inflation in the medium term and challenges the role of government bond performance. Secondly, the current pandemic has accelerated a shift toward corporate sustainability and financial security having flushed out the ever increasing yet suppressed global debt issues within the corporate environment. This has left a clear path for investment opportunities into strong and stable assets under A to AAA rated bank issued financial vehicles to extensively mitigate risk.

To clarify, we are in no way clear of further company collapse and upset within the equity sector although  surviving corporates coming through such a rapid and sustained financial downturn, will be highlighted to be the medium to longer term investment opportunities.