As Chief Market Strategist, Julien Lafargue is responsible for the investment outlook at Barclays Private Bank. Prior to this, Julien Lafargue was Head of Equity Strategy for Advisory Business at Barclays Private Bank, which he joined in January 2019. Prior to that, he spent 11 years at J.P. Morgan Private Bank as Equity Strategist for the EMEA region.
What is your overall view of the macro-economy in 2024?
If we have to sum it up very succinctly: lower growth, lower inflation and lower interest rates! After a surprising year in terms of growth, particularly in the USA, we expect global growth to moderate, without collapsing. We also expect inflation to be close to central bank targets in the UK, Europe and the USA.
Will central banks cut rates?
We believe so, because growth is disappointing and slowing, but so is inflation. We should therefore be entering a process of normalization.
Two exceptions to the rule, however, with slightly different dynamics compared to the rest of the world: India, where growth is expected to exceed 6% in 2023, and to perform just as well in 2024. China, where inflation is expected to pick up, whereas the country is currently in deflation.
How does this vision of the world influence investment?
In 2023, as central bank rates rose, we positioned ourselves in bond yields, and we secured these yields. Now we have to position ourselves in an environment of falling rates. We are therefore focusing on bonds with longer maturities. In equities, we're focusing on slightly more defensive sectors.
From a credit point of view, we are focusing on good-quality companies, as a slowdown in growth and the need for refinancing could weigh on certain more indebted companies.
On the equity side, we invest in pronounced DNA companies with a proven track record of generating profits, whatever the macroeconomic environment, because they offer high value-added products or services. Companies with healthy balance sheets and strong management teams.
2023 was dominated by the Magnificent Seven (Google, Amazon, Facebook, Apple, Microsoft, Nvidia and Tesla), responsible for 60% of the SNP500's performance in the USA. But outside this top group, 142 out of 500 companies outperformed. We believe that in 2024, many investment opportunities will arise in this type of company.
A word about real estate in Europe?
In 2023, the market's resilience in terms of prices came as a surprise, while the number of transactions collapsed. If interest rates fall, this will breathe new life into the market, and the environment will be favorable in 2024 on two levels:
- Quickly, for investors with capital to deploy
- In a few months' time, for buyers who will benefit from lower interest rates.
This is an attractive asset class.
In conclusion?
The geopolitical environment is highly uncertain... which is why our approach includes portfolio diversification, both on the bond side and the equity side. Private equity, tangible debt and real estate are also very important. We believe that the portfolio should be optimally constructed, with a holistic vision, to counterbalance the risks.
