House View Q4 2024: Shifting gears

Our view of global markets

Watershed moment
The fact that the interest rate cut by the US Federal Reserve in September was anticipated makes it no less of a watershed moment for markets. While the opportunity set for investors may not change overnight, we think it marks the beginning of the end of a period where technology stocks and cash (or cash-like instruments) have been the only game in town.
In our view, a soft landing continues to be the most likely outcome for the US economy. The future trajectory of interest rates – including the speed of cuts and the new neutral rate – remains in flux. But we think markets expect more rate cuts than a soft-landing outcome would indicate, and a repricing of expectations could be one source of coming volatility.
Overall, conditions should be positive for both bonds and equities, with a particular focus on developed-market equities, investment grade corporate bonds and sovereign bonds.
We know from the brief turmoil in markets in August that every data point is pored over in the current uncertain environment: investors will want to consider an active approach to emerging opportunities.
Staying vigilant, this is the time to consider positioning for an era where risk may be priced differently – and investors can consider more options – than in the recent past.