Richard Collins, senior credit trader, State Street Global Advisors
As a child of the eighties, it’s difficult to express the magnitude of joy that the arrival of the video recorder brought to a kid’s life back then. For me, no toy could match the excitement of pushing that big clunky cassette into the slot, and then feasting my eyes on what became displayed on the modestly sized TV screen.
The Rocky franchise was my favourite and the scene which sticks in the memory is when Clubber Lang (played by Mr T) is asked for a prediction for his fight with Rocky. Lang looks into the camera and menacingly snarls “PAIN!”. Sadly, that is also the prediction I make today for 2024.
Consider the challenges faced in 2023: Two wars, two major banks defaulting, an unprecedented 500bp hike in the Fed Funds rate… market resilience this year has almost defied logic. YTD the S+P is up 17%! However, those headwinds haven’t disappeared. They’re merely sleeping. Rate hikes are notoriously laggy. Geopolitics dangerously unpredictable. Add in the potential banana skin of 2 billion people voting globally in elections next year, and the prospects for 2024 look fraught.
Kevin Thozet, member of the investment committee, Carmignac
In H1 2024, the global economy should be resilient to the real rate shock thanks to manufacturing restocking, tight labour markets, a drop in Chinese risk premium and excess liquidity. However, these buffers will weaken in H2 as the effects of monetary tightening peak and central banks start timid rate cuts.
In government bonds, the tug of war between high policy rates and the resurrection of the price discovery mechanism, means that selecting appropriate maturities and regions will matter as much as market direction. Five-year maturities appear to be the sweet spot. Long term deficit financing appeal to few. The soft-landing environment in H1 implies that credit markets will retain their leading spot in terms of risk-adjusted returns. Macro headwinds should arise in H2, making bond picking more crucial.
After a wild run by the Magnificent 7, equity performance drivers will broaden. Such concentrated returns require some wariness; implementing a barbell approach to diversify from those favoured names makes sense. Defensiveness via healthcare and staples and some higher return potential via emerging markets on the other side.
Chris Jackson, global head of equities strategy and head of EMEA equities, Liquidnet
The past 12 months have shaken European equity markets, as higher rates and geo-political uncertainty have slowed activity and diluted investor conviction. A primary concern for participants is how to navigate an increasingly nuanced and fragmented liquidity landscape to execute strategies in fast-paced and, at times, unforgiving conditions.
Platforms and brokers’ expertise and technology are essential for sophisticated investors looking to source the types and volumes of liquidity needed to execute complex strategies. Whether seeking specific large blocks or small-mid cap stocks, complex, hard to source and sometimes niche liquidity requires knowledge, connectivity and market access to execute efficiently and effectively. As we reach the peak of the current rates cycle, there will be investment opportunities in primary and secondary markets as long as there is sufficient liquidity to support implementation.
Looking ahead, success will be driven by the combination of human expertise and relationships, augmented by data and technologies to enhance the liquidity discover process. As buy-side firms plan their 2024 strategies, they are thinking carefully about how to reliably access sometimes niche liquidity in an ever-evolving market
Matthew Hodgson, chief executive and founder, Mosaic Smart Data
In the current climate, gaining a new client is becoming more and more difficult – and banks must do everything in their power to retain and grow existing client accounts. The best advice I’ve heard from one of our customers is – pick the markets you want to excel in and supercharge your sales and customer service by harnessing the power of your untapped transaction data.
Amidst a backdrop of volatility, economic uncertainty and lower market activity in some asset classes, FICC market participants are struggling more than ever to source and protect liquidity. Data is the key to getting the insights that allow you to see where the herd is trading, where the alpha is, and where you can find the specific instruments you want to trade.
It goes without saying that the last year has been a turbulent period for banks across the globe. For those that have remained profitable, a laser-sharp focus on efficiency has become central to their businesses. With an uncertain year ahead, sales and trading teams must be equipped with tools to improve productivity and efficiency in a cost-effective manner against a backdrop of cost cutting and headcount slimming.