Australian Shares, International Shares, Investments

Investment agility required in 2024

Inflation Schroders Australian shares International shares

Inflation and volatility are likely to continue their influence on markets in 2024, which should encourage a flexible approach to shares and bonds.

A global fund manager has suggested a need for investors to be nimble in their approach towards portfolio allocations to equities and fixed income in 2024 as inflation and volatility are still likely to be influencing market factors in the year ahead.

“Higher inflation could cause the negative correlation between equities and bonds to break down, which could exacerbate volatility in portfolio returns. However, more volatility offers opportunity to investors to capitalise on the dispersion of investment returns,” Schroders Australia head of multi-asset Sebastian Mullens predicted.

“Investors should consider being active in security selection in both equities and credit. When money was free, loss-making companies could survive on the promise of future earnings. With the higher cost of capital today, companies will be forced to repay debts sooner.

“This means identifying companies that can defend their moat and make pricing adjustments to defend their margins.”

He forecast another year of strong performance from United States equities, but also anticipated Australian shares could provide significant upside for investors too.

“The question for 2024 is whether the US equity market will continue its dominance or whether the laggards will catch up. While US equities are expensive on most valuation metrics, forward-looking earnings expectations are strong. Analysts expect earnings to grow just shy of 12 per cent over next year and another 8.5 per cent the year after,” he noted.

“If policymakers are able to achieve a soft landing, there is also scope for other markets to catch up with the US. Australia looks attractive given its relatively cheap valuation.”

According to Mullens, the Australian securities market will also benefit from the demand for commodities, in particular those associated with energy transition and the technology sector.

Further, he said he expected companies with inflation-linked earnings to provide solid investing opportunities and generate strong returns.


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