Outlook for the year ahead
Rate cuts appear to be priced in across a number of markets over the next 12 months, and inflation has come down from its peak in key economies. However, we believe inflation is still likely to remain higher than it was prior to the Covid pandemic. As a result, markets are expected to continue to be highly sensitive to economic data and the impact it has on interest rates.
Although the outlook for rates and inflation in 2024 looks better overall than it did in 2023, we believe that we are likely heading into a period of persistently higher inflation and interest rates, as well as greater macroeconomic volatility, than we have seen over the last decade or so.
Whilst markets are optimistic, significant rate cuts may not materialise as soon as expected and we may not return quickly to a low-inflation environment. A degree of unpredictability about markets and the future state of economies continues to impact the investment outlook.
At Rest we’ve identified five megatrends we believe will broadly help shape society and markets. These megatrends are decarbonisation, deglobalisation, demographics, digitisation, and debt and central bank policy. Megatrends offer the prospect of longer term investment opportunities that transcend economic and interest rate cycles.
Our view is as investors we will have to be selective to be successful. We are therefore putting this into practice, and focusing on assets we believe are well-positioned to benefit from these megatrends over the long term.
Our investment strategy also includes exposure to a broader range of diversifiers that have inflation-hedging characteristics, including foreign currency, real assets and natural assets. Examples include our infrastructure assets that support energy transition, which aligns with the decarbonisation megatrend, and our investments in data centres and telecommunications networks that will help underpin ongoing digitisation.
Thinking about what trends and events will shape the future, and investing in them now, helps us position our diversified portfolios to capture returns both now and into the future. Our goal remains to deliver strong long term returns to help you achieve your best possible retirement outcome.