With 2023 drawing to a close, investors and advisors can reflect on the narratives that carried the day. At the same time, it’s important to consider what narratives may or may not have a meaningful impact on portfolios next year.
Major asset managers often release outlooks that attempt to assess just that. T. Rowe Price’s recent 2024 outlook offers a look into the firm’s thinking that may intrigue curious investors, with some notable takeaways below.
Not Just the Tech Giants
A big part of the story in 2023 has been the so-called Magnificent Seven carrying a lot of the market’s performance on its backs. That said, investors may want to look outside of those big names, especially to avoid concentration risk.
Per T. Rowe Price’s 2024 outlook, healthcare innovation could appeal, which does stand out with recent regulatory approval for gene treatments in the U.S. and new diabetes medications, for example.
At the same time, renewable energy firms could rebound while emerging markets equities retain attractive valuations. The firm’s outlook particularly emphasizes EM equities and over-developed equities, given their valuations and upside. Nations like Indonesia, Brazil, and Malaysia could also benefit from global supply chain decentralization.
Active investing may present the best route into those areas, it should be said. Given how high interest rates continue to present headwinds to healthcare innovators and renewables, active strategies can help identify the best opportunities in those spaces.
When Might Rates Be Cut?
The “higher for longer” regime remains a key theme entering 2024 to any market observer in the U.S. While futures markets may be pricing in “four” Fed rate cuts in 2024, T. Rowe Price’s 2024 market outlook instead offers a base-case scenario that central banks will hold the line for much of 2024. Absent “canaries in the coal mine” like a banking crisis, commercial real estate collapse, or a megacap tech implosion, high rates seem likely to hold.
Looking across that fixed income landscape, certain segments may appeal for those refreshing their fixed income allocations. Attractive yields may point to areas like corporate high yield bonds despite yield gaps in government bonds trending toward historical averages. With high yield debt offering higher-quality options, improved safety can pay. That can appeal as volatility remains a concern.
Don’t Be Too Bearish in Your 2024 Outlook
Market uncertainty doesn’t require excessive bearishness, per the firm’s 2024 outlook. For example, areas like small and midcap stocks are sitting at nice valuations. They could offer appealing upside even in volatility. An active strategy can identify the firms in those spaces that have proved their resilience to the higher-rate regime. So, while the outlook suggests against taking big allocation bets, alternatives, for example, could appeal.
Those are just three points to consider from T. Rowe Price’s 2024 outlook. For investors looking to gauge their views and compare them to T. Rowe Price’s, the outlook may be a good place to start.
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