We predicted that 2023 would be a challenging year. Unfortunately, we have been proven right. China’s economic recovery fell short of expectations, the US 10-year Treasury bond yield hit 16-year highs and inflation remained sticky. However, the global economy stayed resilient in the face of aggressive rate hikes and rising tensions in the Middle East. 2024 will bring about multiple transitions. Some of the global economy’s earlier resilience will give way as the full effect of restrictive monetary policy kicks in. In contrast, the Chinese economy will likely stabilize in 2024, having endured slower growth for most of 2023.
Global central banks are likely to be at or close to the end of their rate hiking cycles as inflation pressures ease, although they would be wary of declaring victory over price rises too quickly. A pivot to rate cuts would be some months away. Nevertheless, a broad and sustained decline in inflation could usher in a turning point for bonds. We retain a quality bias in US and Asian bonds at this late stage of the economic cycle. Given elevated yields, US Treasuries may regain their historical role as portfolio diversifiers. As for equities, while Asia ex Japan lagged the US market in 2023, the region is expected to perform better on the back of attractive valuations and more favourable economic fundamentals in 2024.
Access our 2024 Market Outlook to find out how investors can seize opportunities amid continued market volatility.
- How should investors position for heightened volatility?
- Will a US recession be deep or protracted?
- Will central banks cut rates earlier than expected?
- Is growth showing signs of stabilising in China?
Beyond the cyclical shifts, the global economy and investing landscape will experience long-term structural transitions. The diversification of global supply chains will impact economic prospects and investment flows, while Generative Artificial Intelligence (AI) will disrupt business models and sectors. As economies continue their transition to a net-zero future, investors are increasingly applying a just transition lens onto climate action. Our report highlights the key roles Emerging Markets and Asia are playing in driving and adapting to these long-term transitions.
As investors seize the opportunities arising from the various transitions, they should be mindful of the potential risks and the lessons learned in 2023. Market volatility is here to stay as policymakers prioritise credibility over market pressures. Investors will need to be nimble in their views and positioning. Diversification and risk management remain key to navigating volatile markets and dynamic asset allocation will be ever more important when underlying market drivers are changing so swiftly.
Deep dive into key investment themes
Singapore by Eastspring Investments (Singapore) Limited (UEN: 199407631H)
Australia (for wholesale clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore, is exempt from the requirement to hold an Australian financial services licence and is licensed and regulated by the Monetary Authority of Singapore under Singapore laws which differ from Australian laws
Hong Kong by Eastspring Investments (Hong Kong) Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong.
Indonesia by PT Eastspring Investments Indonesia, an investment manager that is licensed, registered and supervised by the Indonesia Financial Services Authority (OJK).
Malaysia by Eastspring Investments Berhad (200001028634/ 531241-U) and Eastspring Al-Wara’ Investments Berhad (200901017585 / 860682-K).
Thailand by Eastspring Asset Management (Thailand) Co., Ltd.
United States of America (for institutional clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore and is registered with the U.S Securities and Exchange Commission as a registered investment adviser.
European Economic Area (for professional clients only) and Switzerland (for qualified investors only) by Eastspring Investments (Luxembourg) S.A., 26, Boulevard Royal, 2449 Luxembourg, Grand-Duchy of Luxembourg, registered with the Registre de Commerce et des Sociétés (Luxembourg), Register No B 173737.
United Kingdom (for professional clients only) by Eastspring Investments (Luxembourg) S.A. - UK Branch, 10 Lower Thames Street, London EC3R 6AF.
Chile (for institutional clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore and is licensed and regulated by the Monetary Authority of Singapore under Singapore laws which differ from Chilean laws.
The afore-mentioned entities are hereinafter collectively referred to as Eastspring Investments.
The views and opinions contained herein are those of the author, and may not necessarily represent views expressed or reflected in other Eastspring Investments’ communications. This document is solely for information purposes and does not have any regard to the specific investment objective, financial situation and/or particular needs of any specific persons who may receive this document. This document is not intended as an offer, a solicitation of offer or a recommendation, to deal in shares of securities or any financial instruments. It may not be published, circulated, reproduced or distributed without the prior written consent of Eastspring Investments. Reliance upon information in this document is at the sole discretion of the reader. Please carefully study the related information and/or consult your own professional adviser before investing.
Investment involves risks. Past performance of and the predictions, projections, or forecasts on the economy, securities markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of Eastspring Investments or any of the funds managed by Eastspring Investments.
Information herein is believed to be reliable at time of publication. Data from third party sources may have been used in the preparation of this material and Eastspring Investments has not independently verified, validated or audited such data. Where lawfully permitted, Eastspring Investments does not warrant its completeness or accuracy and is not responsible for error of facts or opinion nor shall be liable for damages arising out of any person’s reliance upon this information. Any opinion or estimate contained in this document may subject to change without notice.
Eastspring Investments companies (excluding joint venture companies) are ultimately wholly owned/indirect subsidiaries of Prudential plc of the United Kingdom. Eastspring Investments companies (including joint venture companies) and Prudential plc are not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America or with the Prudential Assurance Company Limited, a subsidiary of M&G plc (a company incorporated in the United Kingdom).