January 24, 2024
Both experience and history suggest that market participants often struggle to correctly predict macro outcomes when looking a year ahead. We believe this lesson is especially relevant in the current environment, in which the consensus has moved toward a soft-landing expectation for the US economy in 2024. Consistent with this, the Fed’s “dot plot” has signaled that rate cuts will begin this year, while the market is pricing in even more aggressive cuts.1 This scenario could prove to be correct, but we believe additional upside in risk assets is limited after the Q4 2023 rally.
Conversely, the macro consensus could prove inaccurate once more, with the potential for a painful downward move in asset prices given starting valuations. The downside risk is an important reason why we prefer to approach investing from a bottom-up, fundamental standpoint. Researching investments on a security-level basis is an approach that allows a manager to meet client objectives quietly and consistently without requiring more unreliable assumptions on economic outcomes or the Fed’s actions.
Unless otherwise stated, the information presented has been prepared from market observations and other sources believed in good faith to be reliable. Information and opinions expressed by PPM are current as of the date indicated and are subject to change without notice.
Past performance is no guarantee of future results. Investments involve varying degrees of risk and may lose value.
