New year, new predictions
Fund manager forecasts for 2024
According to the annual fund manager poll conducted by the Association of Investment Companies (AIC), Information Technology is expected to be the best performing sector in 2024.
The sector was tipped by just over a quarter (26%) of respondents, followed by Industrials with 19% and Healthcare and Energy both at 15%. The poll was carried out among AIC member investment company managers between 13 and 27 November 2023.
Information technology was tipped as the best performing sector in 2024 by just over a quarter (26%) of respondents, followed by Industrials with 19% and Healthcare and Energy both at 15%.
On a five-year view, Information Technology took a more commanding lead with 44% of respondents believing the sector will be the best performing over the next five years, followed by Energy (19%) and Healthcare (15%).
Best performing regions and assets
The UK is predicted to be the best performing region next year, selected by nearly half of respondents (44%), followed by the US (15%) and Japan (11%).
Over the next five years, just under a third of investment company managers (30%) think the UK remains the most attractive region, followed by Emerging Markets (19%), the US (15%) and Europe (11%).
Investment company managers expect small-cap equities to be the best performing asset class in 2024 with 26% of all votes cast, followed by mid-cap equities (19%), large-cap equities and bonds (both 11%).
Where will the FTSE close at the end of 2024?
More than two-thirds (70%) of investment company managers believe global stock markets will rise in 2024, with 15% saying they will fall and the rest unsure. When it comes to the FTSE 100, 65% of investment company managers suggest the index will be above 7,500 compared to 35% who believe it will fall below this level.
Inflation, interest rates and other threats
The majority of investment company managers (78%) believe interest rates have peaked compared to 7% who think there could be more pain to come and 15% who preferred not to give a verdict. However, most managers (59%) think the Bank of England base rate will still be above 4% by the end of 2024.
An overwhelming majority (93%) of investment company managers think inflation will continue to fall over the coming years. However, respondents think this could be a slow, drawn-out process. Only 7% believe the Bank of England will meet its 2% target next year, with 33% suggesting the target will be hit in 2025, 41% in 2026 and 11% in 2027 or later.
Reasons to be fearful (and cheerful)
When asked about the biggest threat to equities over the next 12 months, the most common answer was a recession, cited by 26% of respondents.
The single greatest cause for optimism is interest rates reducing, according to 30% of investment company managers, followed by opportunities in undervalued companies (22%) and cooling inflation (15%).
Annabel Brodie-Smith, Communications Director at the Association of Investment Companies (AIC), said: “With the rise of artificial intelligence and the fast-paced development of cloud-based systems and hardware, it is no surprise that investment company managers have tipped Information Technology to be the best performing sector of 2024 and beyond.
“The UK is perceived to be the most attractive region in 2024 and over the next five years, and the majority of managers are bullish on stock markets.”
“The UK is perceived to be the most attractive region in 2024 and over the next five years, and the majority of managers are bullish on stock markets. Most managers believe interest rates have peaked and inflation is reducing, though the pace of this may well be slow. The continued threat of a recession remains, along with the risks associated with the war in the Middle East and the impact it may have on oil prices.
“After a difficult year for markets, it’s encouraging to hear most managers are bullish on the short-term prospects for stock markets – although of course no-one has a crystal ball. As always, it’s important for investors to focus on creating a balanced long-term portfolio which meets their needs – with the help of a financial adviser if necessary.”
“In 2024, global growth leadership is likely to shift from the US towards Europe and emerging markets.”
Andrew Bell, Manager of Witan Investment Trust, said: “In 2024, global growth leadership is likely to shift from the US towards Europe and emerging markets, though initially through the US slowing down rather than booming conditions elsewhere. This should be reflected in equity returns, where valuations remain optimistic in the US and over-concentrated, contrasting with modest ratings elsewhere. We expect another year of (modestly) positive returns, as interest rate sentiment improves.
“We are troubled by the risk that the outcome of the US election could be a withdrawal of the US from international affairs, at a time of global tensions and threats to peace and liberty. Although this is not specifically an economic risk, markets are moved by changing risk premia as well as underlying fundamentals and appeasing, rather than resisting, international aggression would be a negative factor."
“The biggest risk in 2024 is a US recession and its impact on global corporate earnings."
Alex Wright, Portfolio Manager of Fidelity Special Values, said: “The biggest risk in 2024 is a US recession and its impact on global corporate earnings. While there is increasing talk of a soft landing, there is considerable historical evidence on the impact of monetary tightening to keep us cautious on company prospects in the near term. The good news is, unlike in other global markets, where this risk is not reflected in high valuations, the valuation of the UK market provides investors a strong margin of safety for this risk, and there are many specific opportunities available today for differentiated stock pickers.”
“We continue to like Indonesia and the country is currently the largest absolute weight in the portfolio.”
Emily Fletcher, Co-Manager of BlackRock Frontiers Investment Trust, said: “We continue to like Indonesia and the country is currently the largest absolute weight in the portfolio. We are positive on the country’s ability to grow, due in part to beneficial policymaking. For example, by banning the export of raw ore, Indonesia has increased the value of its mineral exports, enhanced its domestic processing and refining capabilities, and created more economic opportunities for its people. We therefore remain positive on their ability to grow the value added from their nickel exports. We are also positive on other ASEAN markets as we believe many of these countries stand to benefit from increased geopolitical tensions worldwide. These countries will likely maintain trade relations with both the West and the East, and can therefore benefit from the shifting in global supply chains away from China.”
Comments from other managers can be found here.
