Investment Outlook

Home
Wealth management
Insight
Investment Outlook
Think Future 2024: Your guide to the global investment landscape

Willem Sels

Global Chief Investment Officer, HSBC Global Private Banking and Wealth

Navigating a complex world through quality assets and structural opportunities

The financial markets have experienced another eventful year, from the collapse of Silicon Valley Bank in the first quarter to the geopolitical conflict in the Middle East in October. Moreover, central banks' aggressive rate hikes have sent bond yields to multi-year highs and made financial conditions more challenging.

As we look ahead to 2024, we see two positive drivers on the horizon. The number one challenge of rate hikes in major economies is finally fading away. The other positive is that the US economy appears to be heading for a soft landing, mitigating the risk of a global recession. These developments should allow financial markets to breathe a sigh of relief.

However, Europe is teetering on the brink of recession will continue to weigh on global economic growth, while lingering geopolitical tensions and a busy election calendar in 2024 promise further bouts of market volatility. What should investors do in this complex environment?

Positioning for a mild acceleration of growth in the second half of 2024

Although global growth will be relatively slow, it remains positive with a full-year GDP growth forecast of 2.3% for 2024. In fact, we expect a mild acceleration in the second half of 2024 because falling inflation should help drive consumption, while the expectation of rate cuts led by the US in Q3 2024 should support investment and boost margins. What's more, we see long-term structural trends turning into attractive opportunities.

Setting sail on the right course

Bond yields remain at attractive levels but tight financial conditions, slow growth and heightened geopolitical risks have led us to maintain our preference for high-quality bonds. What has changed from the last quarter is that government bonds of medium-to-long duration in developed markets look more attractive, as do Indian local currency bonds given their compelling yields, diversification benefits and India's growth prospects.

In the equity market, we prefer quality large-cap companies because they can generally withstand higher rates and market uncertainty better. Earnings potential will become a key metric for stock selection. Geographically, the US offers solid fundamentals and structural opportunities, such as the re-industrialisation trend and rapid innovation. That should allow companies in the technology, industrials, consumer discretionary and healthcare sectors to surprise positively on earnings.

In Asia, growth momentum in India and Indonesia remains strong. In addition, we expect earnings in the Asian tech sector to bottom out soon, and South Korea should see a broad-based recovery in 2024 as the global tech cycle improves. Sustainability remains an important theme for investors, especially with the UN Climate Change Conference (COP 28) turning the spotlight on the need for more global collaboration to address climate change. With ongoing investment in renewable energy and biodiversity, and continued improvement in ESG governance, companies that can take advantage of these developments will be well-placed for long-term outperformance.

A focus on quality and fundamentals has served us well in 2023 and we feel the same will be true going into next year. But we see many opportunities that we want to capture and believe that the beginning of the year is always a good time to review your portfolio. We hope our investment themes will help you achieve your investment and protection goals. Best wishes for a successful investment journey in 2024.

Download the full publication

Investment themes

We believe central bank pauses will lead to a rate plateau, with the US Federal Reserve likely to start cutting in Q3 2024 and the European Central Bank and the Bank of England following later. Amid a high-for-longer rate environment and slow growth in developed markets, we favour investment grade bonds as they’re better able to navigate tight financial conditions and heightened geopolitical risks.

Solid US economic data and concerns over increased issuance of US Treasuries to fund the government deficit have pushed up yields for long maturities and made their valuations more attractive. We’ve therefore extended our duration positioning across developed market government bonds to medium-to-long in order to lock in attractive yields before they come down.

Indian bonds, ranging from government and quasi-sovereign bonds to high-quality credit, are another bright spot given India’s solid economic growth and stable currency outlook. The inclusion of Indian bonds in a key global emerging markets benchmark index is expected to attract an influx of USD20 billion, supporting bond valuations. In addition to offering more compelling yields than their counterparts in most developed and emerging markets, Indian bonds provide investors with access to a relatively uncorrelated and large emerging market.

We look to longer maturities of up to 7-10 years in US Treasuries and UK gilts. For corporate bonds, we maintain our preference for investment grade credit and maturities of 5-7 years. 
We favour Indian local currency bonds for yield enhancement and diversification.

The US economy is more resilient than most other markets, and that should remain the case in 2024 thanks to cooling inflation and the end of rate hikes. These trends support equity valuations and improve companies’ profit margins. S&P 500 company earnings are projected to rise by 5.3% y-o-y in Q4 2023 and 12% y-o-y in 2024. As a result of these tailwinds, US equities remain our biggest overweight, while Europe is yet to see a rebound.

Fundamentally, we remain bullish on Asia but the divergence in growth has led us to favour India and Indonesia above all. Both enjoy a positive structural growth outlook, favourable demographics and strong domestic consumption. India has been one of the best performing equity markets in 2023 with strong GDP and earnings growth expectations. Indonesia remains our top pick in the ASEAN region, given its attractive valuations, improving balance sheets and robust capex growth, reflecting stronger corporate confidence. South Korea should perform well as the global tech cycle improves.

Overall, we prefer quality large-cap companies with strong balance sheets and low debt levels. We believe they can deliver on or even exceed earnings expectations amid a global growth slowdown and market uncertainty.

We continue to prefer US over European stocks and overweight Asia ex Japan equities, particularly India, Indonesia and South Korea. 
In Latin America, Mexico is benefitting from US re-onshoring activities, while Brazil offers attractive equity valuations.

Structural shifts in the US are turning into long-term opportunities. The technology revolution and AI-related developments should help create new business models, boost productivity and increase the return on invested capital. The theme of the re-industrialisation of North America is also set to benefit manufacturing and job creation, while US consumption is well supported by a strong labour market and falling inflation as disposable income rises.

We expect US economic resilience to provide support for a broader range of sectors. Innovation in US healthcare will be a key driver in reducing costs and creating demand for new products and services. Geopolitical tensions could put upward pressure on energy prices, making energy stocks a good hedge against oil supply and geopolitical risks. As technology, healthcare and consumer discretionary are expected to deliver close to an 18% rise in earnings per share in 2024, we believe a tilt towards cyclical sectors mixed with value exposure will help investors capture diverse sources of growth while mitigating short-term volatility.

Elsewhere, we’re more defensive in Europe and see opportunities in healthcare driven by a boost in sentiment and sales expectations around new pharmaceutical products. Asia also offers pockets of secular growth because of its huge population and leadership position in e-commerce and semiconductor manufacturing.

We like technology and energy in all regions and favour consumer discretionary, financials, industrials and healthcare (US and global).
We favour both consumer discretionary and staples, as well as communications services in Asia, and healthcare in Europe.

Momentum is building towards a sustainable future driven by green technology, rising global investment in and demand for sustainable solutions, and continued improvement in ESG governance. Renewable energy remains an area of huge attention both socially and commercially, with investment in this sector reaching USD334.5 billion in H1 2023, up 14% y-o-y1. Europe is a big investor in renewable energy, with Southeast Asia, India, China and Australia also ramping up their efforts to support the build-out of clean energy capacity.

Biodiversity investment is also gaining prominence, with the Kunming-Montreal Global Biodiversity Framework in late 2022 setting new goals to conserve land and oceans by 2030. Its implementation is being financed by a USD1.4 billion global biodiversity fund for developing countries.

Climate talks will resume against a backdrop of extreme weather events and a renewed focus on achieving the net zero transition at the next UN Climate Change Conference (COP 28) in the UAE.

This will mark the conclusion of the first-ever global stocktake, which assesses progress towards the 2015 Paris Agreement goals. In areas where governments fail to deliver on these objectives, we think companies, consumers, cities and investors can provide a powerful impetus for progress.

Integrating sustainability in investment processes is becoming a global trend in the finance industry. Companies and sectors that can take advantage of the ESG developments will be potential long-term winners.

Renewable energy, including wind, solar and biofuels, continues to gain investment traction.
Investing in biodiversity presents cross-sector opportunities, such as technological innovation.

Regional market outlook

The US economy remains resilient thanks to a strong labour market, while falling inflation is leaving households with more money to spend. Government stimulus programmes are bringing manufacturing and research & development back. Moves like this should support activity in areas like healthcare, engineering and robotics, which are being further boosted by advances in AI. All of this should help counter the headwind of high interest rates, as shown by the outperformance of US stocks against other markets in 2023. We think high-quality USD bonds are attractive as the Fed appears to have completed this cycle of interest rate hikes and is likely to start cutting in Q3 2024.

Eurozone countries are either in recession or close to it and the region’s high interest rates, volatile energy prices and proximity to the wars in the Middle East and Ukraine may continue to weigh on sentiment. Hence, we prefer the US equity market over the Eurozone. The UK equity market is also somewhat better placed than that of continental Europe due to its larger energy exposure and lower valuations. Both the UK and the Eurozone will probably need to wait longer than the US to make rate cuts since inflation is proving stickier.

EM EMEA economies are facing significant headwinds because of their proximity to the devastating wars in the Middle East and Ukraine and Europe’s slow growth rate. Despite geopolitical uncertainty, oil prices have stayed below recent highs thanks to slower global growth. Turkey’s recent switch to a more conventional monetary policy, however, has led to a partial recovery in risk appetite.

Latin America’s interest rate cycle is ahead of the US with rate cuts now well under way, which should support the region’s stock and bond markets. Moreover, US companies continue to diversify their supply chains, and trade with Mexico in particular continues to grow.

We maintain a neutral view on the mainland Chinese and Hong Kong SAR equity markets despite their very low valuations as we think the Chinese property sector will be an obstacle to the material acceleration of economic growth and earnings. We see more positive cyclical and structural growth in both India and Indonesia, with the former benefitting from a vibrant startup ecosystem and the latter well placed in the net zero transition as an important player in the electric vehicle supply chain. Both countries, and the ASEAN region as a whole, are attracting foreign investment linked to the supply chain diversification.

The Japanese equity market has had a strong run in 2023 to date, but largely as a result of JPY weakness, and the return in USD has not been that strong. Markets continue to second-guess the Bank of Japan’s monetary policy, which has changed several times and seems to reflect only a very reluctant tightening stance. As a result, volatility of JPY, stocks and bonds may remain elevated in 2024. With high valuations and institutional investors already heavily allocated to the market, we think upside is becoming more limited.

Key data to watch

Source: HSBC Global Research as at 22 November 2023. Estimates and forecasts are subject to change. India inflation forecasts are fiscal year.

Source: Refinitiv, HSBC Global Private Banking as at 21 November 2023. Past performance is not a reliable indicator of future performance. Forecasts are subject to change.

Source: Bloomberg, HSBC Global Private Banking as at 1 November 2023. Past performance is not a reliable indicator of future performance.

Start your financial health check

Take your financial health check and that will help you to understand your needs, make and achieve your financial plan.

Log on and apply

Wealth Management

Your goals are unique to you. We’ll help you reach them – first by assessing your situation, then by helping you put a plan in place

Apply now

Investment Monthly: A stronger case for equities on improved fundamentals and positive growth

The recent upside surprise on US inflation data does not change our view that the Fed will...[5 Mar]

Special Coverage : Fed begins to pivot to discuss rate cuts

As expected, the Fed left rates unchanged at 5.25-5.5% for a fourth straight meeting. [5 Feb]

HSBC Perspectives: HSBC Perspectives Q4 2023

As we look ahead to the final months of 2023, the financial markets are at a...[8 Sep]

This document or video is prepared by The Hongkong and Shanghai Banking Corporation Limited (‘HBAP’), 1 Queen’s Road Central, Hong Kong. HBAP is incorporated in Hong Kong and is part of the HSBC Group. This document or video is distributed and/or made available by HSBC Bank Canada (including one or more of its subsidiaries HSBC Investment Funds (Canada) Inc. (“HIFC”), HSBC Private Investment Counsel (Canada) Inc. (“HPIC”) and HSBC InvestDirect division of HSBC Securities (Canada) Inc. (“HIDC”)), HSBC Bank (China) Company Limited, HBAP, HSBC Bank (Singapore) Limited, HSBC Bank Middle East Limited (UAE), HSBC UK Bank Plc, HSBC Bank Malaysia Berhad (198401015221 (127776-V))/HSBC Amanah Malaysia Berhad (20080100642 1 (807705-X)), HSBC Bank (Taiwan) Limited, HSBC Bank plc, Jersey Branch, HSBC Bank plc, Guernsey Branch, HSBC Bank plc in the Isle of Man, HSBC Continental Europe, Greece, The Hongkong and Shanghai Banking Corporation Limited, India (HSBC India), HSBC Bank (Vietnam) Limited, PT Bank HSBC Indonesia (HBID), HSBC Bank (Uruguay) S.A. (HSBC Uruguay is authorised and oversought by Banco Central del Uruguay), HBAP Sri Lanka Branch, The Hongkong and Shanghai Banking Corporation Limited – Philippine Branch, HSBC Investment and Insurance Brokerage, Philippines Inc, and HSBC FinTech Services (Shanghai) Company Limited and HSBC Mexico, S.A. Multiple Banking Institution HSBC Financial Group (collectively, the “Distributors”) to their respective clients. This document or video is for general circulation and information purposes only.

The contents of this document or video may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose. This document or video must not be distributed in any jurisdiction where its distribution is unlawful. All non-authorised reproduction or use of this document or video will be the responsibility of the user and may lead to legal proceedings. The material contained in this document or video is for general information purposes only and does not constitute investment research or advice or a recommendation to buy or sell investments. Some of the statements contained in this document or video may be considered forward looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors. HBAP and the Distributors do not undertake any obligation to update the forward-looking statements contained herein, or to update the reasons why actual results could differ from those projected in the forward-looking statements. This document or video has no contractual value and is not by any means intended as a solicitation, nor a recommendation for the purchase or sale of any financial instrument in any jurisdiction in which such an offer is not lawful. The views and opinions expressed are based on the HSBC Global Investment Committee at the time of preparation and are subject to change at any time. These views may not necessarily indicate HSBC Asset Management‘s current portfolios’ composition. Individual portfolios managed by HSBC Asset Management primarily reflect individual clients’ objectives, risk preferences, time horizon, and market liquidity.

The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested. Past performance contained in this document or video is not a reliable indicator of future performance whilst any forecasts, projections and simulations contained herein should not be relied upon as an indication of future results. Where overseas investments are held the rate of currency exchange may cause the value of such investments to go down as well as up. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. Economies in emerging markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be affected adversely by economic conditions in the countries in which they trade. Investments are subject to market risks, read all investment related documents carefully.

This document or video provides a high level overview of the recent economic environment and has been prepared for information purposes only. The views presented are those of HBAP and are based on HBAP’s global views and may not necessarily align with the Distributors’ local views. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. It is not intended to provide and should not be relied on for accounting, legal or tax advice. Before you make any investment decision, you may wish to consult an independent financial adviser. In the event that you choose not to seek advice from a financial adviser, you should carefully consider whether the investment product is suitable for you. You are advised to obtain appropriate professional advice where necessary.

The accuracy and/or completeness of any third-party information obtained from sources which we believe to be reliable might have not been independently verified, hence Customer must seek from several sources prior to making investment decision.

Important Information about HSBC Global Asset Management (Canada) Limited (“AMCA”)

HSBC Asset Management is a group of companies, including AMCA, that are engaged in investment advisory and fund management activities, which are ultimately owned by HSBC Holdings plc. AMCA is a wholly owned subsidiary of, but separate entity from, HSBC Bank Canada.

Important Information about HSBC Investment Funds (Canada) Inc. (“HIFC”)

HIFC is the principal distributor of the HSBC Mutual Funds and offers the HSBC Mutual Funds and/or the HSBC Pooled Funds through the HSBC World Selection® Portfolio service. HIFC is a subsidiary of AMCA, and indirect subsidiary of HSBC Bank Canada, and provides its products and services in all provinces of Canada except Prince Edward Island. Mutual fund investments are subject to risks. Please read the Fund Facts before investing. ®World Selection is a registered trademark of HSBC Group Management Services Limited.

Important Information about HSBC Private Investment Counsel (Canada) Inc. (“HPIC”)

HPIC is a direct subsidiary of HSBC Bank Canada and provides services in all provinces of Canada except Prince Edward Island. The Private Investment Counsel service is a discretionary portfolio management service offered by HPIC. Under this discretionary service, assets of participating clients will be invested by HPIC or its delegated portfolio manager, AMCA, in securities, including but not limited to, stocks, bonds, mutual funds, pooled funds and derivatives. The value of an investment in or purchased as part of the Private Investment Counsel service may change frequently and past performance may not be repeated.

Important Information about HSBC InvestDirect (“HIDC”)

HIDC is a division of HSBC Securities (Canada) Inc., a direct subsidiary of, but separate entity from, HSBC Bank Canada. HIDC is an order execution only service. HIDC will not conduct suitability assessments of client account holdings or of the orders submitted by clients or from anyone authorized to trade on the client’s behalf. Clients have the sole responsibility for their investment decisions and securities transactions.. The following statement is only applicable to HSBC Mexico, S.A. Multiple Banking Institution HSBC Financial Group with regard to how the publication is distributed to its customers: This publication is distributed by Wealth Insights of HSBC México, and its objective is for informational purposes only and should not be interpreted as an offer or invitation to buy or sell any security related to financial instruments, investments or other financial product. This communication is not intended to contain an exhaustive description of the considerations that may be important in making a decision to make any change and/or modification to any product, and what is contained or reflected in this report does not constitute, and is not intended to constitute, nor should it be construed as advice, investment advice or a recommendation, offer or solicitation to buy or sell any service, product, security, merchandise, currency or any other asset.

Receiving parties should not consider this document as a substitute for their own judgment. The past performance of the securities or financial instruments mentioned herein is not necessarily indicative of future results. All information, as well as prices indicated, are subject to change without prior notice; Wealth Insights of HSBC Mexico is not obliged to update or keep it current or to give any notification in the event that the information presented here undergoes any update or change. The securities and investment products described herein may not be suitable for sale in all jurisdictions or may not be suitable for some categories of investors.

The information contained in this communication is derived from a variety of sources deemed reliable; however, its accuracy or completeness cannot be guaranteed. HSBC México will not be responsible for any loss or damage of any kind that may arise from transmission errors, inaccuracies, omissions, changes in market factors or conditions, or any other circumstance beyond the control of HSBC. Different HSBC legal entities may carry out Wealth Insights internationally in accordance with local regulatory requirements. HSBC specifically prohibits the redistribution of this material and is not responsible for any actions that third parties may take to and/or with it.

Important Information about the Hongkong and Shanghai Banking Corporation Limited, India (“HSBC India”)

HSBC India is a branch of The Hongkong and Shanghai Banking Corporation Limited. HSBC India is a distributor of mutual funds and referrer of investment products from third party entities registered and regulated in India. HSBC India does not distribute investment products to those persons who are either the citizens or residents of United States of America (USA), Canada, Australia or New Zealand or any other jurisdiction where such distribution would be contrary to law or regulation.

The following statement is only applicable to HSBC Bank (Taiwan) Limited with regard to how the publication is distributed to its customers: HSBC Bank (Taiwan) Limited (“the Bank”) shall fulfill the fiduciary duty act as a reasonable person once in exercising offering/conducting ordinary care in offering trust services/ business. However, the Bank disclaims any guarantee on the management or operation performance of the trust business.

The following statement is only applicable to PT Bank HSBC Indonesia (“HBID”): PT Bank HSBC Indonesia (“HBID”) is licensed and supervised by Indonesia Financial Services Authority (“OJK”). Customer must understand that historical performance does not guarantee future performance. Investment product that are offered in HBID is third party products, HBID is a selling agent for third party product such as Mutual Fund and Bonds. HBID and HSBC Group (HSBC Holdings Plc and its subsidiaries and associates company or any of its branches) does not guarantee the underlying investment, principal or return on customer investment. Investment in Mutual Funds and Bonds is not covered by the deposit insurance program of the Indonesian Deposit Insurance Corporation (LPS).

THE CONTENTS OF THIS DOCUMENT OR VIDEO HAVE NOT BEEN REVIEWED BY ANY REGULATORY AUTHORITY IN HONG KONG OR ANY OTHER JURISDICTION. YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO THE INVESTMENT AND THIS DOCUMENT OR VIDEO. IF YOU ARE IN DOUBT ABOUT ANY OF THE CONTENTS OF THIS DOCUMENT OR VIDEO, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE.

Important information on sustainable investing

In broad terms “ESG and sustainable investing” products include investment approaches or instruments which consider environmental, social, governance and/or other sustainability factors to varying degrees. Certain instruments we classify as sustainable may be in the process of changing to deliver sustainability outcomes. There is no guarantee that ESG and Sustainable investing products will produce returns similar to those which don’t consider these factors. ESG and Sustainable investing products may diverge from traditional market benchmarks. In addition, there is no standard definition of, or measurement criteria for, ESG and Sustainable investing or the impact of ESG and Sustainable investing products. ESG and Sustainable investing and related impact measurement criteria are (a) highly subjective and (b) may vary significantly across and within sectors.
HSBC may rely on measurement criteria devised and reported by third party providers or issuers. HSBC does not always conduct its own specific due diligence in relation to measurement criteria. There is no guarantee: (a) that the nature of the ESG / sustainability impact or measurement criteria of an investment will be aligned with any particular investor’s sustainability goals; or (b) that the stated level or target level of ESG / sustainability impact will be achieved. ESG and Sustainable investing is an evolving area and new regulations are being developed which will affect how investments can be categorised or labelled. An investment which is considered to fulfil sustainable criteria today may not meet those criteria at some point in the future.

No part of this document or video may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited.

Think Future 2024: Your guide to the global investment landscape

Navigating a complex world through quality assets and structural opportunities

Investment themes

1. Optimise bond returns with quality and duration

2. Focus on large-cap stocks with attractive earnings potential

3. Exploit opportunities from a broad range of sectors

4. Integrate sustainability to capture green potential

Regional market outlook

United States ↑

Eurozone ↓ UK ↔

EM EMEA ↓ EM Latin America ↑

Asia (ex Japan) ↑

Japan ↔

Key data to watch

We expect economic growth in the West should bottom in Q1, followed by a mild acceleration

Valuations look more attractive for 2024 across markets and sectors, which are positive for equities

Although growth is low by historical standards, we foresee better growth in H2

Start your financial health check

Wealth Management

Investment Monthly: A stronger case for equities on improved fundamentals and positive growth

Special Coverage : Fed begins to pivot to discuss rate cuts

HSBC Perspectives: HSBC Perspectives Q4 2023

Disclaimer