All Omnis Wants For Christmas Is…

With December 25th fast approaching, the impending question of what we would like for Christmas looms over us all. While the typical gifts of socks, boxes of chocolates, and cozy Christmas pyjamas often come to mind, this year, we thought of a different request to Santa. Beyond the customary presents, the Omnis investment team thought about what gift could potentially enhance the investment landscape for 2024.

Economically Positive Elections

Andrew Summers, Chief Investment Officer

'In 2024, more than half of the world’s population will vote in general elections, the US, Taiwan, India, and (most likely) the UK. Global economic conditions have been extremely turbulent since the global pandemic, and in some regions since the global financial crisis. Election winners with responsible policies that focus on pro-long-term growth and stability should be positive for financial markets.'

End to Conflict

Andrew Summers, Chief Investment Officer

'Global conflicts, particularly those in the Middle East and Ukraine, have intensified our concerns about human suffering and the urgent need for peace. The ripple effects beyond humanitarian crisis’ falls into the impact on economics and financial markets, particularly where there is risk of conflagration..'

Active Outperformance

Hannah Evans, Head of Manager Research

'In recent years equity markets have been dominated by market sentiment despite mixed company performance. An environment where stocks react more in line with their individual fundamentals instead of following broad market moves opens a field of opportunity for active managers. More dispersion amongst stock prices and a need for intelligent company analysis allows active managers to seek outperformance again through traditional stock picking.'

A Soft Landing

Richard Garland, Chief Investment Strategist

'Economic activity is sluggish in many areas, but most western economies are likely to avoid recession with a so-called soft landing. A soft landing is where an economy sees growth bottom out but avoids falling into a recession. This is a positive outcome versus falling into a deep recession. Market expectations for recessions across major economies is low, however, the full effect of monetary policy tightening has yet to be felt and it is too early to signal the all-clear.'

A Better Year For Cautious Clients

Rohit Vaswani, Client Portfolio Manager

'With interest rates having likely peaked, we hope to see bond returns improve and thus cautious portfolios reaping the benefits from that. Cautious clients do have some exposure to equities in their portfolios so as bond/equity correlations begin normalising, any periods where bonds underperform, diversification through equities can dampen losses and improve performance.'

Government Bond Rebound

Paul Freedman, Investment Analyst

'Rising interest rates have pushed government bond yields upwards and bond prices downwards across both short dated and long dated bonds. Central banks now look to have paused in their hiking cycles, and the market now expects their next moves to be in reducing interest rates. Bonds have begun to recover slightly, seeing falls in yield (increases in price) based on this pause particularly in long dated bonds where duration (sensitivity to interest rate moves) is a lot higher. However, more clarity is needed on what level inflation starts to settle and the depth of economic slowdowns. A rebound in bonds would see strong capital gains for investors.'

Traditional Correlations Back in Play

Stewart Duncan, Investment Specialist

'An unusual market environment in 2022 pushed equities and bonds to both post negative returns, an event rarely experienced. Through 2023, we have begun to see negative correlations between equities and bonds and their diversifying characteristics return. This negative correlation allows for multi-asset portfolios to be more protected from extreme downside moves when one asset class may be out of favour.'

AI Innovation and an End to Narrow Leadership

Jake Bloom, Investment Analyst

'Advances in computing hardware and deep learning innovations led to an inflection point for artificial intelligence (AI) in late 2022. This steered a handful of large US tech stocks to narrowly dominate market returns through much of 2023. AI is already reshaping markets; companies are racing to adopt the technology and progress in AI tech proved to be a major positive for earnings and productivity in 2023. There will be limits to AI adoption and not all potential outcomes of this revolution could be positive, cybersecurity being a chief concern. Disentangling hype from reality will be a key focus for investors in 2024 and we hope to see more broad -based and diversified market performance going forward.'

From everyone at Omnis, we wish you all a Merry Christmas and a Happy New Year!