Market Returns

Investors should be tactically tilting allocations towards Direct Lending, Distressed Debt, and Directional Hedge Fund strategies at the expense of Real Estate, Private Equity, and Diversifier Hedge Funds. Structural opportunities are emerging in Real Estate and Venture Capital.

Decelerating nominal sales, a peaking credit cycle, and very high valuations - Indian stocks will not escape the carnage when risk assets globally begin to sell off.

Despite the blah opening to the year, we do not think stocks have reached an inflection point. We expect that incoming data will continue to flatter the soft-landing narrative for another couple of months, helping the S&P 500 to establish a new all-time high before the rally runs out of steam.

A soft landing can be achieved but not maintained. We are cutting our tactical recommendation on stocks from overweight to neutral and scaling back our long-duration stance.

In this week’s report, we present our dollar view for 2024 and beyond, with a few trade ideas.

We expect the US economy to slow and potentially downshift into a recession sometime in 2024, as tighter monetary policy weighs on consumers and businesses. In addition, (geo)political tensions may increase market volatility. The risk/return for US equities is unfavorable. We recommend that our clients reduce portfolio beta and increase allocations to defensives and quality growth.

Treasury yields will sketch out a range between now and Q1 2024, with the upside determined by inflation and the downside determined by labor markets.