Geopolitical events cannot be ignored in investing, warned Joe Quinlan, head of market strategy in the Chief Investment Office.
“In investing, it’s dangerous to say that this time is different,” Quinlan explained.,“but today’s geopolitical landscape, with two major wars and growing conflict between China and Taiwan, really is different.
“The current environment marks a shift from many decades in which the United States helped to promote a free trade environment and a liberal economic order. Now, Iran, North Korea, Russia and China are pushing against that order, and the current level of geopolitical tension is likely to persist throughout 2024 and beyond,” he said.
“Persistent geopolitical tensions have led to higher defense spending, not only in the United States, but also in Taiwan, Japan and Europe, with all having defense spending now approaching 2% of GDP,” he added. “That benefits global defense companies and cybersecurity leaders. Oil prices, which are likely to remain elevated amid ongoing global conflicts, could help energy stocks and commodities.”
Lauren Sanfilippo, senior investment strategist in the Chief Investment Office, had one negative note to add.
“Consumer discretionary stocks could underperform in 2024, coming off an above-trend spending pattern as pressure on consumers is gradually building. Yet, despite the increase in financing costs for corporations, earnings are expected to rise in 2024 after having reset in 2023,” she said.
Hyzy summed up the predictions for the coming year.
“2024 should be a year of more normal market behavior — one in which fixed income provides income, equities provide growth, cash provides cash flow and, for qualified investors, alternative investments provide that diversifying element that simply wasn’t there for an extended period of time,” he said.