In 2024, One-Size-Fits-All Investing Won’t Cut It

In 2024, One-Size-Fits-All Investing Won’t Cut It
Theodora Lee Joseph, CFA

3 months ago2 mins

The world’s most important economies have spent most of the past decade traveling in a pack – growing and shrinking in tandem, albeit at different speeds. But in 2024, they’re likely to go their own way, according to Capital Group, one of the world’s oldest and biggest fund managers.

In its 2024 outlook, the Los Angeles-based investment house – which has an attention-grabbing $2.6 trillion under management – says the weighty impact of high inflation and high interest rates will tear the pack apart. Japan and India will head toward robust growth, it says, while China and Europe will go in the opposite direction as tricky trade conditions and escalating geopolitical tensions put a damper on their economies. The US, meanwhile, is expected to stay on a slow but surely course toward growth, prodded along by the still-strong US consumer and a seemingly invincible job market.

And that divergence is likely to stick around for a while, Capital Group says. After all, the era of ultra-low, near-zero interest rates isn’t likely to make a comeback anytime soon. Sure, interest rates might have hit their peak, but the chances of significant cuts from here are getting slimmer with each new sign that the world’s economies might avoid a catastrophic recession. Capital Group foresees 10-year US Treasury yields in 2024 hovering between 3.5% and 5.5% – roughly in line with historical norms that date back to the 1870s. In other words, this past decade of near-zero interest rates was the exception, not the historical rule.

If Capital Group’s predictions about economic growth across each country are correct, then using a one-size-fits-all investment strategy probably won’t cut it. Instead, you’ll want to take a sector-by-sector look at where you’re invested. After all, the sectors that might be expected to outperform in India next year will look very different from those in Europe or China, or the US. For instance, tech stocks usually rock it in the middle of the business cycle when things are humming along, but when things get rough, defensive players like utilities, healthcare, and consumer staples tend to outshine the rest. Every business cycle is its own beast, but looking back at how investments performed in the past, across different phases, can give you some solid pointers as you plan your portfolio for 2024.



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