Invest cautiously in 2024

Will 2024 be more of the same of 2023 for investments?

Will it echo the key themes of peak inflation, peak interest rates and the potential for a global recession? The upside was that it was also positive for most asset classes that performed well.

Maarten Ackerman, chief economist and advisory partner at Citadel, says the short answer is that investors must adjust their outlook to take a more cautious approach in terms of where they invest in 2024. He believes that while the US avoided a recession in 2023, it was simply delayed.

“This year is going to be challenging from an economic point of view and if investors want to get ahead in 2024, optimal portfolio construction is going to be crucial for short- to medium-term investments,” he says.

“Being overweight in cash and bonds right now makes sense given current rates, while an underweight in equity with an allocation to defensive companies is warranted. Equity should remain part of your long-term investment portfolio. Considered investment decisions will ensure we are able to manage volatility in 2024.

“As we enter 2024, we get a definite sense of déjà vu, a feeling that this time last year, we spoke about the same challenges. We also predicted strong headwinds for risky assets, including the rand.

“We can essentially copy and paste this outlook with a few additional local and global risk factors in the mix, but there are still good investment opportunities.”

He says markets underestimated the resilience of the US economy last year.

“During Covid, US stimulus provided a savings buffer for consumers to weather the high interest rates of 2023. But this is going to change in 2024 and the impact of higher interest rates will be felt.”

SA also faced several additional headwinds last year, including numerous structural issues, poorly performing state-owned enterprises and a slowdown in the global economy which meant reduced trade with its primary trading partners.

Ackerman says 2024 is going to be much the same, but with additional uncertainty around the elections.