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2024 Investment Outlook

A problem of interest - how rates affect investment strategy in 2024

Download the 2024 Investment Outlook

Investment Themes

Higher rates and tighter credit conditions have created ‘a problem of interest’.

This environment challenges economic and business growth, which is something investors should be prepared for.


A problem of interest

Higher interest rates and less availability of credit has helped reduce inflation. However, it risks sending developed economies into recession in the months ahead.


New Paradigm

We are in a new economic regime that is very different to the 2010s. Investors should not expect a return to the very low interest rates and loose credit conditions of the previous decade.


Defensive Growth

Market expectations are for a ‘soft landing’
– inflation continues to fall back as economies
slow, but growth remains positive. We focus on defensive strategies in portfolios to protect against adverse scenarios and think ‘bonds are back’.

Read our full outlook to explore the implications for portfolios:

  • Bonds are back
    A weaker economy and disinflation should be a supportive environment for government bonds and a challenging one for stocks.

  • Divergent stories in equities
    We expect that Japanese stocks could be an outperformer among developed markets over the short and longer term. In the West, US equities are confronted with a couple of challenges, while European stocks look cheaper, and hence downside could be limited.

  • Keep an eye on emerging markets
    The Federal Reserve cutting interest rates can be very positive for emerging markets performance.

Average non-investment grade bond yields exceed historic returns from equity

Pre-tax yields from non-investment grade credit versus historic stock market returns

Non-investment grade bond yields exceed historic returns from equity

Past performance is no guarantee of future returns.
Returns are for market indices and do not reflect any fees or currency considerations. Source: HSBC AM, Bloomberg, December 2023.
The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested.

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Risk Warning
The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance is not a reliable indicator of future performance. Any views and opinions expressed are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. We accept no liability for any failure to meet such forecast, projection or target. This webpage has not been reviewed by the Securities and Futures Commission. The information provided does not constitute any investment recommendation in the above mentioned sectors, asset classes, indices or currencies.