Yet Michael Strobaek, chief investment officer, private bank, at Lombard Odier, anticipates investment opportunities from peaking interest rate cycles, particularly in fixed income.

The Swiss firm thinks that a sharp downturn will be avoided in the US, with growth just below 1 per cent for the full year and interest rate cuts in the second half of the year. The eurozone could stage a slightly larger recovery, the firm added. Both inflation and growth have slowed sharply, while the full effects of monetary tightening have yet to be felt. It expects growth of just above 1 per cent in 2024, helped by a resilient labor market and some monetary policy easing from mid-year.

In Switzerland, a slower pace of rate cuts in 2024 than in other developed economies is expected, with growth remaining subdued at around 1.3 per cent in 2024. Inflation should moderate further in the UK in 2024, and growth should see a limited rebound, enabling the Bank of England to cut rates mid-year.

Japan’s growth will decelerate in 2024, according to Lombard Odier, but should still produce another year of 2 per cent inflation. The firm expects an end to the Bank of Japan’s negative interest rate policy.

In the absence of more aggressive reforms, Lombard Odier sees China’s growth rate slowing to just below 5 per cent in 2024. It also sees a ‘soft-landing’ of slightly better growth and lower inflation in 2024 for emerging markets, although individual experiences will vary.

Portfolio allocation
Despite the risk of a mild US recession and subpar growth elsewhere in developed markets, Christian Abuide, head of asset allocation sees a comparatively soft landing ahead. He sees attractive risk-reward in high quality fixed income, and maintains a neutral view on equities, where he prefers the US, Japan, and the UK.

Paris-based asset manager Carmignac also sees a renewed interest in Japanese equities in 2024. German asset manager DWS and Orbis Investments also believe that the Japanese market will be attractive in 2024, citing factors such as the rebound in tourism in Japan. See more here and here.

The US dollar should remain supported, but move lower in the second half, and Abuide expects commodities to be torn between tight supply and weak demand.

Lombard Odier maintains a neutral exposure to risk in multi-asset portfolios, balancing the positives from recent economic resilience and disinflation against the expected delayed effects from higher borrowing costs.

Equity markets can deliver positive returns in the late stages of economic cycles. Lombard Odier sees gains for the S&P 500 being driven by earnings' growth. The firm believes that communication services and energy will outperform in the first half, and prefers consumer staples and telecoms over healthcare, real estate, and utilities among defensive sectors.

Peaking yields and a soft economic landing should be a positive environment for high quality fixed income, according to Lombard Odier. In light of the expected growth slowdown, it likes investment grade credit. It also favors emerging market local currency debt, especially that of Brazil where the monetary cycle is well advanced. Other wealth managers also favor bonds in 2024. Carmignac, HSBC Global Private Banking, UBS Global Wealth Management see value in quality bonds. See more here and here.