Christopher DEMBICK, Investment Strategy Consultant at Pictet Asset Management - At the beginning of January, Christopher DEMBICK presented his macro-economic vision of the markets in Monaco, as well as his investment projections for 2024.A graduate of Sciences Po Paris and the Economic Institute of the Warsaw Academy of Sciences, Christopher DEMBIK was an economist and then head of macro-economic research at Saxo Banque, after working at the French Treasury as an analyst in the green energy sector and then as a macro and foreign exchange analyst at Wingate Ventures.
At the end of 2023, the first thing to note is that there was a real gap between what the consensus forecast and what actually happened.
85% of economists surveyed by the Financial Times at the end of 2022 expected the US to fall into recession in 2023. In reality, third-quarter growth reached an annualized 4.9%. This was largely the result of substantial public spending (deficit at 7% of GDP).
China's strong recovery was expected but did not materialize. The Covid zero policy is over. But the Chinese economy is lagging behind. Recovery will be slow, not least because the government has not planned any spending increases to support activity.
Inflation has been high, but the disinflation process has been very rapid. In the eurozone, 80% of the components used to calculate inflation fell in November - an unprecedented figure.
The markets had anticipated a 141 basis point rise in the ECB's key interest rate. In the end, it was more brutal than expected. Rates rose by 250 basis points!
Investors were betting on a normalization of monetary policy in Japan. At its meeting on December 18-19, 2023, the Bank of Japan maintained its policy of negative interest rates.
Wheat and corn prices were predicted to explode, but are now below their 2015-2018 levels. Wheat, for example, has fallen by 21% since the start of the year.
Today, long rates have fallen. But uncertainty remains over their short-term evolution. Equities are recovering, but it's mainly the Magnificent Seven that are concentrating the flows.
A recovery in China, a further fall in inflation, a hiccup in US growth? A new beginning is possible, but it remains to be seen who will kick-start it.
More specifically, regarding the 2024 forecasts:
The Magnificent Seven: Apple, Microsoft, Alphabet, Amazon, Tesla, Meta and Nvidia are must-haves in a portfolio built for yield. Tech stocks could, some would argue, have been endangered by rising key interest rates. In reality, 2023 has been an excellent year for this type of stock, and this is set to continue. As far as Artificial Intelligence (AI) is concerned, there is no first-mover premium, but rather a premium for the amount of cash invested. On themes such as the ability to collect and manage data, the Magnificent Seven are undeniably well positioned. What's more, the years of crisis are setting the pace for security research in terms of technology, and we can expect to see strong inflation in A.I. and data center security...
Biotechs could be a pleasant surprise in 2024. These are often smallcaps, but over the past three years, the market has squeezed out unprofitable companies, and this sector is set to pick up again. Essentially multi-product biotechs, which avoid hyper-specialization. For these, fine patents should follow.
Japanese equities will maintain their momentum, as will those of emerging countries. Japanese equities had their best year in a decade, with the Nikkei up 27%. This will continue.
Quality allocations should outperform in a period of weak economic growth.
Prestige brands, in the hyper-luxury segment, remain growth drivers and are highly resilient, even without relying on the Chinese market.
Finally, investors are likely to record above-average gains on bond markets. With a preference for short maturities in high yield, and for bonds from the countries.
