With
inflationary
fears
beginning
to
ease,
threats
and
opportunities
abound
in
markets,
though
investors
do
indeed
face
considerable
risk
and
volatility.
However,
it
is
important
to
ignore
wider
market
distractions
and
remain
focused
on
investing
in
the
right
asset
classes
and
at
the
right
time.
After
months
of
interest
rate
rises
and
concerted
efforts
by
central
banks
to
ease
inflationary
fears,
the
measures
appear
to
be
working.
November
saw
US
inflation
levels cool
to
3.2%,
from
a
high
of
9.1%
in
June
last
year
with
the
UK
market
also
showing
promising
decreases.
But
while
UK
has
seen
the
biggest
drop
in
inflation
figures
since
the
early
1990s,
the
economic
outlook
remains
uncertain.
A
recession
is
now
confirmed,
though
how
long
it
will
last
is
another
question.
In
any
case,
we
are
not
out
of
the
woods
just
yet;
inflation
is
still
quite
high,
and
energy
prices
are
a
significant
factor
to
consider.
As
we
navigate
2024,
we
may
find
the
US
economy
remains
resilient.
Multi-asset
investors
need
to
keep
a
tight
focus
on
the
assets
most
likely
to
generate
strong
returns.
That
means
avoiding
short-term
noise
and
focusing
on
the
bigger
picture.
Why
Bonds?
Why
Multi-Asset?
From
an
asset
standpoint,
the
key
question
is:
which
way
should
investors
turn
next?
While
2023
was
a
less-than-stellar
year
for
alternative
investments
such
as
renewable
energy,
we
believe
they
remain
broadly
attractive.
Revenues
of
many
of
the
underlying
companies
in
the
alternative
investment
sector
are
index-linked
so
can
offer
some
protection
against
inflation.
Across
more
mainstream
asset
classes,
bond
markets
are
also
showing
optimistic
signs
of
real
recovery
following
a
challenging
2022.
We
think
bond
yields
are
looking
increasingly
attractive,
both
here
and
in
the
US,
from
the
long
end.
After
over
a
decade
of
relative
real
yields,
investors
are
now
getting
true
inflation
protection
from
fixed
income.
In
equity
markets,
there
remains
strong
pockets
of
opportunity.
However,
it
could
be
argued
much
of
their
2023
success
was
driven
by
large
US
technology
companies,
in
particular
the
“Magnificent
Seven”,
with
a
more
mixed
performance
elsewhere.
In
our
view,
the
success
of
these
top
companies
has
tended
to
overshadow
weakness
among
other
companies
and
sectors.
It
has
actually
been
quite
a
challenging
12
months
for
equity
investors,
although
price/earnings
ratios
do
look
to
be
improving
and
the
equity
market
picture
remains
balanced,
as
fiscal
spending
has
remained
supportive.
Headwinds
&
Tailwinds
From
a
thematic
standpoint,
we
see
key
potential
drivers
of
change
and
opportunity
for
committed
equity
investors.
They
include
the
energy
transition,
technological
shifts,
the
rise
of
state
intervention
and
ageing
populations.
But
there
is
also
real
reason
for
caution.
Geopolitical
factors
could
still
spook
investors
and
spark
renewed
market
volatility.
The
coming
year
will
see
general
elections
across
several
major
economies –
including
the
US –
so
political
uncertainty
over
their
outcomes
could
heighten
investor
nervousness.
While
this
may
weigh
on
investor
sentiment,
it
might
pay
not
to
focus
too
much
on
the
headlines
around
this.
We
will
hear
a
lot
of
noise
but
it
is
important
to
stay
focused
in
order
to
pinpoint
businesses
that
will
continue
to
generate
strong
cash
flows
and
investor
returns.
Bhavin
Shah
is
multi-asset
portfolio
manager
at
Newton
Investment
Management
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