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Bear or Bullish? London expert investors predict the markets in 2024 (14/12/2023)
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Oct 7, 2024
As 2023 concludes and a new year is on the horizon, we attended the Edelman Smithfield Investor Summit at the London Stock Exchange to speak to a handful of expert investors on their predictions for 2024. Their responses might surprise you. Here's what they had to say. š www.cityam.com X(formerly Twitter): http://twitter.com/CityAM Facebook: www.facebook.com/cityam Instagram: www.instagram.com/city_am LinkedIn: www.linkedin.com/company/cityam
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0:00
What will you remember 2023 for
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I think what's been interesting about 2023 was the obsession never happened. Right at the start of the year, was it going to be first half, was it going to be second half
0:21
Has it arrived? So from that point of view, it's been quite a benign environment, actually
0:26
Yes, you know, some markets come under a bit of pressure here and there, but generally markets have gone up
0:29
Obviously, particularly the mega caps have gone completely crazy. Bond valuations which had been backing up, beginning to come down now
0:36
So effectively, it's kind of felt like we just escaped a really nasty beating
0:42
I think everyone came into 2023 expecting markets to be weaker. But actually, they were perhaps not as weak as everyone thought
0:48
Certainly as that's imagined, see, and we expected their markets be weaker that clients would still want to invest
0:53
And what's actually happened is that markets have been stronger, but with interest rates so elevated
0:57
clients have this aversion towards risk assets. I think 23 has been a really interesting year
1:03
and investors have really been focused on their core portfolio allocation. So pluses and minuses
1:10
but lots of opportunities still out there. 2023 is about to wrap up. So what are your thoughts
1:14
in this year? What are your big takeaways? So I'm in the pension industry. The big takeaway is
1:19
the upending of pension asset allocation, the rise of Clara as a super fund and the changing dynamics into
1:25
for our entire market and what the government and our members expect of us
1:30
So, okay, so in terms of markets as a whole, it's been a tough year with a lot of
1:36
volatility but it looks like interest rates have peaked and inflation probably is on the way down and therefore we going to see a downward trend for interest rates That is good for markets I think most people would say it been a pretty challenging years but lots of volatility
1:50
But two things, I think that volatility has, it always creates some opportunity in the investment world
1:56
As long as you're on the right side of the prevailing themes. And I would also say from our personal perspective that we've seen that the kinds of people that we back
2:04
some of the really experienced top-tier private equity managers have really demonstrated a resilience
2:10
and an ability to be able to rise to the challenge. As we look ahead to 2024, what's one thing
2:15
you're keeping an eye on? Twenty-24 is the year of duration. People are going to want interest rate
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risk. They're actually also going to want all types of fixed income because we finally have a
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yield worth having. So, 2024 is another year of innovation for the pensions market, both in terms
2:31
of new solutions, new investment ideas, and the idea that pension funds can do. more than just secure benefits that they can enhance benefits
2:37
2024 is going to be really interesting. Economically it's going to be interesting because we're going to see a decline in
2:43
interest rates and that makes it an interesting time for markets. There are questions economically that you have to ask which is always exciting
2:51
How far can China remain so undervalued versus the rest of the world? Do you see a comeback of that
2:56
In terms of ESG it's exciting because there is now an acceptance that one part of the ESG
3:03
which is carbon is we know the direction of travel. Now we've got to work on two other bits
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Key is just transition. You cannot have the directionality without just transition
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That's what I talked about when I was in COP. And then the second part is biodiversity
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which we talked about in the COP in Glasgow, which I think has become a mainstream as some of the panels here are talking about I probably am a natural optimist albeit one that tries to ground that looking at what going on and what the data
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So I think we're probably going to have another challenging year in 2024
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but again, I think it's all about capturing some of the inherent opportunities you get
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when that change comes along. And again, I think, you know, speaking, when looking at our portfolio
3:45
I think we are backing managers that are, you know, very on top of a lot of these prevailing kind of megatribaling, kind of megal
3:51
friends and I think are in a great position to be able to capitalize on them. Ultimately, we have increased interest rates
3:57
There's going to be a sort of lagging effect of that. So whilst you may get interest rate cuts next year, I think actually we're going to find
4:03
actually economic downturn comes. Particularly you're going to see more profit warnings. Companies get into financial difficulties
4:08
Some of the zombie companies are going past. I think it's going to be a pretty uncomfortable world. But most particularly, I think what we all see is capital intensive businesses start to do better
4:16
So already the Putsi 100 has already been pretty much the best before we start market since
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September 2020, outperformed by the US just recently, but generally it's right there
4:26
But most particularly, I think you'll see smallness. Smallness has completely missed the boat up to now
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And the great advantage of small companies isn't just they can grow, but often they can grow when there's a recession on
4:35
They can acquire assets from the receiver. So I think we're going to see quite a lot of rotation
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quite a lot of individual coming through, quite a few companies' profit warning. It's going to be a volatile year
4:44
Next year, bare, bullish, what is it going to be like in your industry
4:49
Can you let us know? So I'm a long-term investor, so bear and bull in terms of one year isn't something that we do
4:54
but I can see a lot of volatility next year. The key market for pension funds is the UK guilt
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market I foresee a huge amount of volatility because versus on one hand you have lower inflation and the potential for lower rates On the other hand you have a quarter of a trillion pounds worth of guilt that are going to hit the market That is going to create enormous volatility for the industry I been working private exit for the last 15 years and I
5:17
learned not to over-predict. I think it's all about being able to, you know, having a portfolio
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construction and portfolio management that's resilient to whatever the year may forward us
5:29
I am hopeful on the margin that we see a bit of a recovery in activity and the market. And the market
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the global M&A markets begin to resume a bit more normal scene
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But that all being said, we always hope for the best, but prepare for the worst
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The great advantage of the UK market particularly is it hasn't gone up in any meaningful way for about 30 years
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And so from that point of view, we had a panel just now where people
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some of these sort of strategic ysts, said actually, quite honestly, I can't see any reason to buy the UK
6:01
I think the market is going to be wonderful. It's just going to prove them, not all of them, but many of them wrong
6:06
Specifically, I think the UK will continue to be one of the best foreign stock markets. I think it will continue for the next 10 or 20 years
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But most particularly, whereas previously it's been held back a little bit by smallness
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I think that small cap sector will be one of the best-forming parts of where the best performing markets in the world
6:19
I think the opportunities in private markets, nature, particularly interesting. So that's what we're going to focus on
6:26
That's what we hear from clients. It's about where we're positioned now, where market's position now
6:30
People have been risk-averse. that have been focused on low risk assets. And so any kind of valuation, uplift, yield uplift, growth uplift
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has been unattracted given the high amount of yields available on depository government bonds
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I think that delta changes next year. I don't think it's necessarily straightforward
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I think it's still downside risks. So I'm a tempered ball for most asset classes
6:51
I look at the 2024
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