Indeed, many key questions remain open for debate and close calls, such as whether the U.S. economy will see a soft or hard economic landing, the direction of Federal Reserve (Fed) policy, if the 10-year U.S. Treasury yield has peaked, the path of inflation, and how the election will shape the year. Key investment questions also remain, such as whether the market broadens away from several dominant growth names, and the right price and time for the underperforming small caps, value, and international markets.
Given these crosscurrents, we advise investors to remain closely aligned with their longer term target allocations for stocks, bonds, and cash to start the year.
It’s not yet time to move to offense or defense. But be prepared—that time will come.
Importantly, we continue to express differentiated views within asset classes. Here, our long-standing bias for the U.S. over the international markets remains in place, alongside our continued preference for large caps over small caps. We maintain an emphasis on high-quality fixed income.
Investors should be prepared that our investment positioning by the end of the year could look markedly different than how we enter 2024. As usual, we’ll follow our process, which has served us well over time, and let the weight of the evidence be our guiding light.
Join Co-Chief Investment Officer and Chief Market Strategist Keith Lerner as he summarizes our annual investment outlook with an in-depth look at the economy, markets, and portfolio positioning.
Model : "disclaimer"
Position : "left"
This past year, we have seen the economy prove fiercely resilient and the stock market exceeded most expectations.
Headed into twenty twenty four, keeping an open mind remains of utmost importance as the post pandemic playbook remains challenged.
And it will be just as important for investors to be prepared.
Be prepared that twenty twenty four will likely not be a year to keep an investment strategy on autopilot.
In twenty twenty four, we will see forty elections around the globe, including here in the US. While the Federal Reserve continues a delicate balance are trying to cool the economy enough to tame inflation without causing a recession.
Key investment questions also remain such as whether the market broadens away from several dominant growth companies.
Given these cross currents, we advise investors to remain closely aligned with their long term target allocations for stocks, bonds, and cash to start the year.
It is not yet time to move to offense or defense yet be prepared. That time will come.
Importantly, we continue to express our preferences within asset classes.
Here, our long standing buys for the US over international markets remains in place alongside our continued preference for large caps over small caps.
We maintain an emphasis on high quality fixed income.
A reasonable baseline return assumption for the S and P five hundred is in the range of five to ten percent, but the possibility of a much more dramatic move is elevated based on the path of the economy and elections.
Election years also tend to be bumpier and investors should be prepared for normal pullbacks during the year which should provide investment opportunities.
We continue to have a less positive view on emerging markets where China represents about thirty percent of the index and earning trends remain weak.
Turning to fixed income, a painful three year long reset to significantly higher yields creates better starting points for higher quality bonds.
US treasury yields have likely peaked this cycle after hitting the highest level since two thousand seven. Current yields should appear increasingly attractive relative to inflation and deserve consideration among investors with significant cash balances to deploy.
We advise limiting exposure to riskier segments of fixed income. To recap, we entered twenty twenty four, maintaining our bias to US loss cap and high quality fixed income as we await tactical opportunities.
Investors should be prepared that our investment by the end of the year could look much different than how we enter twenty twenty four. Per usual, we will follow our process, which has served us well over time. And let the weight of the evidence be out guiding light.
To learn more about our views and recommended investment position, Please take a look at our annual outlook publication.
Your truest advisor can help you learn more about how our investment themes will impact your portfolio. Importantly, this is a starting point. We look forward to keeping you informed on our views as the year unfolds.
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