Although the choice of US president would be critical for US foreign policy — with great importance for security and trade with some countries — the choice is highly unlikely to dictate the direction of the economy and overall market opportunity, according to Citi Wealth’s mid-year Wealth Outlook 2024.
In its report, Citi Wealth says it remains focused on the underlying value opportunities when the “noise level” increases, acknowledging that markets may become increasingly captivated by the unpredictable US presidential and congressional election results.
Although Citi Wealth does not believe that the elections would influence economic trajectory or the overall market potential, it highlights that there are many other risks, including potential inflationary shocks and unpredictable geopolitical flare ups.
To this end, Citi Wealth expects the G2 (US and China) powers to stay deeply polarised — expecting their struggle to remain unabated on many levels. The firm explains that it has long argued that the G2 polarisation has far-reaching implications for the world economy, trade, finance, technology, regional and even global stability. Inevitably, this also affects investors’ portfolios and will continue to do so. As such, Citi Wealth regards G2 polarisation as an “unstoppable trend.”
At the beginning of 2024, Citi Wealth outlined a year of recovering corporate profits and slowing US employment. While the global economic expansion is broadening across regions and industries, the report notes that the US Federal Reserve (Fed) will begin to ease monetary policy and shift its focus to sustaining the expansion. Citi Wealth expects US inflation to ease to 2.5% by the end of 2024.
Against this backdrop, Citi Wealth says there is a need for investors to be prepared for a range of possible impacts without derailing core portfolios. “We are focused on building resilient core portfolios with global diversification across asset classes,” says Steven Wieting, chief economist, chief investment strategist and interim chief investment officer for Citi Wealth. “We are encouraging our clients to stay fully invested and to complement their portfolios with high-conviction opportunistic investments,” he adds.
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With markets having priced in continued near-term expansion, Citi Wealth anticipates potential investment opportunities in areas such as US small-and mid-cap growth equities, some developed and emerging markets and defensive growth in healthcare. Investors can seek income from intermediate, high-quality US dollar bonds. Citi Wealth also sees potential in private equity, real estate and hedge funds.
In Asia, a recovering China economy could further boost the region, with Citi Wealth optimistic about Japan and Southeast Asia. With early signs of a near-term turnaround in China, its bargain-priced equities could regain more normal valuations, says Citi Wealth head of investment strategy for Asia Pacific Ken Peng.
“We see continued upside potential in other regional markets meanwhile, and have increased our allocations to China and broader Asian emerging markets. Across the region, we expect Southeast Asia to likely see stronger economic growth in 2025,” says Peng.
