Jeff Brummette, Oakglen’s Chief Investment Officer, addressed the audience, providing a 2023 investment update and the company’s outlook for 2024.
Mr Brummette stated that he expects that the effects of inflation and the central banks’ response to curb this, via interest rate hikes from historic lows, will continue to be felt in 2024. He emphasised that the normalisation of interest rates combined with a growing sovereign debt post-Covid, poses a challenge for most developed countries in the years ahead. According to IMF data, global government debt has reached levels close to those observed post-World War II, limiting governments’ flexibility to fund deficits compared to the post-2008 Global Financial Crisis era.
Shifting focus to equity markets, Mr Brummette observed that, despite 2023 being an excellent year for technology stocks, particularly the so-called ‘Magnificent Seven’, the NASDAQ 100’s performance was still below the high’s witnessed in 2021. Interestingly, the FTSE 100 outperformed the NASDAQ 100 during that period helped by the performance of energy stocks.
Regarding fixed income, Mr Brummette concluded that after last year’s 25% pullback in the UK Bloomberg Aggregate Index, there is now some value in fixed income markets. He prefers the front end of the yield curve, given the observed inversion when comparing 2-year versus 10-year government bond yields. He favours the 3 to 5 year sector in particular.
During the Q&A session, Mr Brummette addressed the issue of Chinese debt and the challenges faced by the Chinese economy, emphasising its potential impact on global growth due to its influence on numerous other nations’ economies. He also mentioned that some Chinese companies are likely to be major beneficiaries of the move towards a greener society, highlighting Chinese advances in electric car manufacturing and solar panels.
In summary, while acknowledging the risk of developed economies slipping into recessions, Mr Brummette believes there are still opportunities for investors. He highlighted energy, defence, and healthcare as three sectors that are likely to outperform, with an emphasis on companies with pricing power and low debt levels.
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Our CIO Jeff Brummette delivering his 2023 investment update and company outlook for 2024