Summary

  • The overall economic and market performance in 2023 provided yet another example of how assuming something is a foregone conclusion can be a risky proposition. As New York Yankee great Yogi Berra famously said, “It ain’t over ‘til it’s over.”
  • The New Year has a long way to go before it is over and there is no doubt the coming months will provide new developments and challenges that will cause markets to re-evaluate the prospects of what lies ahead. As great (and profitable) as it would be to know how everything will end up, there remains persistent uncertainty that will likely the keep the outcomes for markets and the economy in 2024 largely unknowable until the year is over.
  • That said, the confidence intervals around forecasts at the moment are narrower than they have been in years, as the key drivers of the underlying resilience in the global economy still largely remain in place and the key headwinds of high interest rates and inflation look to subside.
  • A base case outlook of moderating inflation, lower interest rates and low but positive economic growth worldwide would appear to be conducive for positive, if unspectacular, risk asset performance that could allow for a collective sigh of relief following three highly volatile years.
  • Recent history, however, combined with the continued prevalence of risks to the outlook (including the path for policy rates, persistent geopolitical tensions and a very busy slate of elections) underline the importance of maintaining a focus on managing risk exposures — and the decades-best opportunities present in the bond market for relatively safe, income-generating assets appear to provide a plus in this column. After all, to use another “Yogi-ism”, “If the world were perfect, it wouldn’t be”.

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