The Big Picture: Global asset allocation 2024 outlook

Given our view that 2024 will bring much lower interest rates, we look forward to better returns on fixed income assets than for some time, and expect riskier assets to eventually benefit from lower rates and the prospect of better growth. Overall, we expect the best multi asset returns since 2019. Consequently, we reduce cash to Zero within our Model Asset Allocation, while increasing investment grade, high yield, bank loans and REITS (all Overweight) and equities (still Underweight). We prefer European and emerging market (EM) assets.  

Model asset allocation 

In our view: 

• Cash rates are higher than for some time but we think there are better options. We reduce to Zero.
• Corporate investment grade (IG) has an attractive risk-reward trade-off. We increase to Maximum.
• Bank loans also offer an attractive risk-reward trade-off. We go further Overweight.
• Corporate high yield (HY) usually does well in an economic recovery. We increase to Overweight.
• Equities offer decent potential but not on a risk-adjusted basis. We increase but remain Underweight.
• Real estate (REITS) has the potential to produce the best returns. We go further Overweight.
• Government yields are higher than for some time but we favour other assets. We remain Underweight.
• Commodities could be helped by weakening dollar but some are expensive. We remain at Zero.
• Gold may be helped by falling yields and weakening dollar but is expensive. We remain at Zero.
• Regionally, we favour Europe and EM (embracing risk).
• US dollar expected to weaken and we partially hedge into JPY.

Our best-in-class assets for 2024 (based on projected returns in local currency) 

• EM IG
• US bank loans
• Eurozone equities