Market Outlook 2024: Extending the investment horizon
Santander Private Banking's central macroeconomic scenario for 2024 is for economic growth to remain in positive territory (but more limited, yet avoiding a global recession), inflation to ease (but remain high), and interest rates to start falling (gradually). We believe that central banks worldwide (with exceptions such as Japan and China) have raised interest rates to very restrictive levels that should be sufficient to moderate inflationary pressures. This change in the monetary policy stance is possible thanks to the confirmation that inflationary pressures are easing.
For the coming year investors should consider strategies beyond the short term to complement the safe haven currently offered by money markets following recent increases in official interest rates. Moreover, we believe it is an excellent time to build diversified portfolios, given the high yields available in both rate-sensitive assets (government bonds) and cyclically sensitive assets (corporate bonds and equities).
Find out our experts' analysis on relevant market indicators with updated insights
What will 2024 bring?
Discover our key messages and possible investment strategies to follow
Key messages in detail
1. Rates will fall in 2024
From "how high" to "how long". The impact of the steepest interest rate hike cycle in decades is proving to be more muted than expected. Consensus has shifted from the inevitability of a recession to a soft landing. The market now gives a high probability to an economy that can sail through without a major crash despite high interest rates.
Growth is resilient but not immune to rates. Underpinned by a strong labor market and a healthy financial situation, the private sector is displaying a considerable capacity to absorb the shock of rate hikes. A recession similar to past cycles is unlikely, but the environment will be one of low growth as long as financial conditions remain so restrictive.
2. Focus on four global shifts
Broadening the view of the cycle. Both the level of interest rate neutrality and the level of inflation are likely to be structurally higher than they have been in the past. Tensions between labor supply and demand appear to support a higher inflation rate.
Four major paradigm shifts. The first upheaval is driven by the need for a radical shift in the energy model to meet the challenge of decarbonization by 2050. At the same time, we are witnessing the most disruptive technological breakthrough since the advent of the internet with the dizzying growth of artificial intelligence solutions. We are also facing a shight in the geopolitical and economic balance as a result of growing mistrust between China and the United States. Finally, investors are witnessing a structural shift in the sources of corporate financing, with a greater role for private markets.
3. Investing beyond the short term
Harnessing both the short and long term... Investors currently have a wide range of investment options that offer returns above the average of recent decades. But none compares
as favorably to recent historical benchmarks as the return on shortterm government bonds. From a broader investment perspective, we believe it makes sense to be positioned in more diversified portfolios that can consolidate current high yields over longer horizons.
...and positioning portfolios for the next cycle. In this era of disruption, it makes sense to broaden the horizon of opportunities beyond more traditional and conservative assets. With a longterm perspective, investors may want to consider the combined effects of inflation and innovation and explore investments in equities and private markets.
This report has been prepared by Santander Wealth Management & Insurance (“WMI”), a global business unit of Banco Santander, S.A. (WMI, together with Banco Santander, S.A. and its affiliates, shall be referred to hereinafter as “Santander”). This report contains economic forecasts and information gathered from several sources, including third parties. While said sources are believed to be reliable, the accuracy, completeness or current nature of that information is not guaranteed, either implicitly or explicitly, and is subject to change without notice. Any opinions included in this report may not be considered irrefutable and could differ from, or be inconsistent with, opinions (expressed verbally or in writing), advice or investment decisions of other areas of Santander.
This report is not intended to be, and should not be, construed in relation to a specific investment objective. It has been published solely for information purposes and does not constitute investment advice, an offer or solicitation to purchase or sell assets, services, financial contracts or other types of agreements, or other investment products of any type (collectively, the “Financial Assets”), and should not be relied upon as the sole basis for evaluating or assessing Financial Assets. Likewise, the distribution of this report to a client, or to a third party, should not be regarded as a provision or an offer of investment advisory services.
Santander makes no warranty in connection with any market forecasts or opinions, or with the Financial Assets mentioned in this report, including with regard to their current or future performance. The past or present performance of any markets or Financial Assets may not be an indicator of such markets or Financial Assets future performance. The Financial Assets described in this report may not be eligible for sale or distribution in certain jurisdictions or to certain categories or investors.
Except as otherwise expressly provided for in the legal documents of specific Financial Assets, the Financial Assets are not, and will not be, insured or guaranteed by any governmental entity, including the Federal Deposit Insurance Corporation. They are not an obligation of, or guaranteed by, Santander, and may be subject to investment risks including, but not limited to, market and currency exchange risks, credit risk, issuer and counterparty risk, liquidity risk and possible loss of the principal invested. In connection with the Financial Assets, investors are recommended to consult their financial, legal, tax and other advisers as they deem necessary to determine whether the Financial Assets are suitable based on such investors particular circumstances and financial situation. Santander, its respective directors, officers, attorneys, employees and agents assume no liability of any type for any loss or damage relating to, or arising out of, the use or reliance of all or any part of this report.
At any time, Santander (or its employees) may align with, or be contrary to, the information stated herein for the Financial Assets; act as principal or agent in the relevant Financial Assets; or provide advisory or other services to the issuer of relevant Financial Assets or to a company connected with an issuer thereof.
The information contained in this report is confidential and belongs to Santander. This report may not be reproduced in whole or in part, or further distributed, published or referred to in any manner whatsoever to any person, nor may the information or opinions contained herein be referred to without, in each case, the prior written consent of WMI.
Santander Private Client” is a brand name trademarked by Santander Bank, N.A. and may be used by its affiliates. Securities and insurance products are not offered by “Santander Private Client” or Santander Bank, N.A.
Any third party material (including logos, and trademarks), whether literary (articles/studies/ reports, etc. or excerpts thereof) or artistic (photos/graphs/drawings, etc.), included in this report are registered in the name of their respective owners and only reproduced in accordance with honest industry and commercial practices.