At the start of every year, we take an in-depth look at the current financial and economic landscape to help our clients prepare for the year ahead. Here’s a summary of what we’re anticipating in 2024. Looking for a more exhaustive forecast? Watch the recording of our annual year in review and 2024 market outlook.
We ended 2023 on an upswing – a market rally before the anticipated economic slowdown. But 2024 may prove equally as volatile as last year was – marked by two distinct halves: recession and recovery.
A mild recession in the first half, followed by a recovery
As analysts have been expecting for months now, we’re likely headed for a mild recession in the first or second quarter¹ of 2024, but the good news is, it shouldn’t last long.
Now that the Federal Reserve has likely finished its interest rate hikes², we’ll start to see company earnings bounce back as the markets begin moving toward a recovery. “Bonds will likely do well,” says Wayne Wachell, Executive Chairperson and Co-Chief Investment Officer at Genus. “Tech should also hold well, and small cap ‘riskier’ names should also start doing well. Another area for potential excitement this year could be gold,” he adds.
However, as economic cycles play out, we’ll be ready, says Mike Thiessen, Chief Sustainability Officer and Chief Co-Investment Officer at Genus. “We’re preparing for whatever happens,” he says, adding that Genus leverages numerous financial models and strategies to adjust its portfolios alongside market fluctuations.
Growth in values-based investing
Experts forecast continued growth in impact investing – the market is expected to grow to $955.95 billion in 2027 from $495.82 billion in 2023³.
In spite of a bumpy several years for values-based investors, it’s a good time to explore the opportunities available in impact and responsible investing. Impact investing has given values-based investors a clear way to support sectors and companies that align with their own values and interests.
“I’m excited about our High Impact Equity Fund,” says Thiessen. “It has a nine-year track record, and it could be a good investment for impact-oriented clients because its performance has been better than the MSCI benchmark,” he says. “We saw new clients invest in the fund in 2023, and we expect more growth in 2024*.”
A big year for biodiversity
A major sub-theme for impact investors this year will be supporting biodiversity through investments that limit harm to biodiverse ecosystems. As sustainability reporting extends beyond carbon emissions and into the protection of global species and habitats⁴, there’s a growing recognition that this issue has become as critical as climate change⁵.
“People are seeing biodiversity as high-priority now,” Thiessen says, “and 2024 could be a big year. Companies that have poor management of biodiversity will be open to more risks such as lawsuits or loss of clients. They could also face more regulation around supply chains, and from a financial point of view, that’s more risky.”
To help guide investors interested in supporting biodiversity protection, Genus has launched a biodiversity screen to exclude companies with poor biodiversity management. This could include, for example, companies that source ingredients from the Amazon rainforest, or companies that use excessive water or pesticides. “Many companies are starting to share their biodiversity risk disclosures,” Thiessen says, “because there’s so much economic value in biodiversity. This screen is something our clients have been asking for.”
Other factors that could affect the economy in 2024
The future is impossible to predict with any certainty, and that’s partly because politics, natural disasters and global conflicts can all play havoc on the markets – like we saw in 2020.
This year, as conflicts continue to play out in the Middle East and Russia/Ukraine, we could see repercussions in the markets, particularly where oil prices are concerned.
Looking ahead, the run-up to November’s US Presidential election also presents opportunities for economic and financial market upheavals, particularly in light of the country’s spiraling debt, which represents a definite “threat to capital markets,” Wachell says.
For full coverage of our 2024 market outlook, watch the recording of our annual year in review and 2024 market outlook.
References
- Konish, L. (2023) The U.S. avoided a recession in 2023. what’s The outlook for 2024? here’s what experts are predicting, CNBC. Available at: https://www.cnbc.com/2023/12/26/the-us-avoided-a-recession-in-2023-whats-the-outlook-for-2024.html (Accessed: 12 January 2024).
- Fed rate hikes are over, economists say. here’s what experts say you should do with your money. (no date) CBS News. Available at: https://www.cbsnews.com/news/federal-reserve-interest-rate-hikes-done-impact-on-your-money/ (Accessed: 12 January 2024).
- Research and Markets (2023) Global impact investing market report 2023: Sector is expected to reach $955.95 billion by 2027 at a CAGR of 17.8%, GlobeNewswire News Room. Available at: https://www.globenewswire.com/en/news-release/2023/04/25/2654230/28124/en/Global-Impact-Investing-Market-Report-2023-Sector-is-Expected-to-Reach-955-95-Billion-by-2027-at-a-CAGR-of-17-8.html (Accessed: 12 January 2024).
- Paddison, L. (2023) Global loss of wildlife is ‘significantly more alarming’ than previously thought, according to a new study, CNN. Available at: https://www.cnn.com/2023/05/22/world/wildlife-crisis-biodiversity-scn-climate-intl/index.html (Accessed: 12 January 2024).
- Paddison, L. (2023) Global loss of wildlife is ‘significantly more alarming’ than previously thought, according to a new study, CNN. Available at: https://www.cnn.com/2023/05/22/world/wildlife-crisis-biodiversity-scn-climate-intl/index.html (Accessed: 12 January 2024).
This document was prepared for general information purposes only and should not be considered a substitute for specific professional advice. In particular, its contents are not intended to be construed as the provision of investment, legal, accounting, tax or other professional advice or recommendations of any kind, or to form the basis of any decision to do or to refrain from doing anything. As such, this document should not be relied upon for investment or other financial decisions and no such decisions should be taken on the basis of its contents without seeking specific advice. This document is based on information available to Genus Capital Management at the date of issue, and takes no account of subsequent developments after that date. In addition, past performance is not indicative of future results. In producing this document, Genus has relied upon the accuracy and completeness of certain data and information obtained from third parties. The links to the issuer website are provided for convenience and we make no warranty or representation that any information is accurate and do not accept any responsibility for information posted on their website.
