The US Federal Reserve is anticipated to execute four interest rate cuts throughout 2024, according to the Franklin Templeton Institute Global Investment Management Survey.
This prediction is in alignment with the futures market and surpasses the Fed’s projection of three cuts. This is expected to lower the federal funds rate to 4.30%, compared to the Fed’s dot plot forecast of 4.63%.
Consequently, experts foresee a decline in the 30-year mortgage rate from nearly 6.7% to around 5.6% by the close of 2024.
The survey indicated expectations of global economic growth falling short of consensus forecasts, especially in Europe and China. Additionally, respondents foresee inflation continuing to decline, albeit at a slower rate than anticipated, while remaining above central bank targets.
Global equity markets ended January 2024 on a “positive note”, data shows
Regarding equities, the forecast suggested a “flat” performance for the year, with the S&P 500 Index projected to end at 4744, essentially unchanged from its starting point. Earnings growth in the US is anticipated to be 5.8%, notably lower than market expectations. Value stocks are favoured over growth stocks, with preference given to US and emerging markets over non-US developed markets.
In the fixed income realm, the trajectory will be influenced by Fed policy, geopolitics, and recession concerns, according to the survey. While two-year Treasury yields are expected to decline significantly, 10-year yields are forecast to experience only modest decreases.
Municipal bonds remain an attractive option due to their high quality and tax-free yields while investment grade debt is favoured over high yield debt due to its superior credit quality, the results showed.
2024 to see “final act” of inflation story, says Mediolanum
According to the survey, commercial real estate shows promise in industrials, multifamily, and life sciences despite office sector challenges. Private credit managers offer favourable terms in these sectors. Secondary investments provide diversification, while macro and “market neutral” hedge fund strategies are attractive amid geopolitical risks.
The survey encapsulated insights from 300 investment professionals across various teams worldwide, covering a spectrum of domains like public and private equity, debt, real estate, digital assets, hedge funds, and secondary private market investments within Franklin Templeton.
