We believe that the world economy will avoid a recession and largely revert to its historical growth track this year and next. We also expect corporate earnings to rise this year and during 2025. Inflation will subside, and central banks will be able to cut their key interest rates, though at varying speeds and magnitudes. Valuations and general risk-taking among investors have climbed, but there is still upward potential.
"We expect continued positive returns from both equities and fixed income and a continued trend towards a broader upturn. We believe that the rest of 2024 will be characterised by an environment of falling inflation and gradually less restrictive central banks," says Fredrik Öberg, Chief Investment Officer at SEB's Private Wealth Management & Family Office Division.
Allocation
We foresee an opportunity for positive returns on both fixed income investments and equities. This means that the entire spectrum, from low-risk to high-risk portfolios, should be able to deliver positive absolute returns. In our model portfolios, we continue to have a moderate overweight in equities. In portfolios that include alternative investments, we underweight these in favour of fixed income investments. If risk appetite continues to rise, these portfolios should be able to generate excess returns relative to our benchmark indices. Risk appetite or positioning among investors has risen a lot since its most recent low in September 2022 but has not yet reached euphoric levels. If the economic cycle turns out as we forecast, there is a good chance that the investor community will take another step upward on the risk scale.
Theme articles
This May 2024 edition of Investment Outlook also includes two interesting theme articles:
- Theme: Central bank choices - Stock market winners and losers
- Theme: India - Strong growth prospects, institutional concerns