Global fund selectors identified recession as their top economic threat for 2024, with 52% expressing concern, and war and terrorism as a close second at 50%, reported Natixis, forecasting a year of significant volatility. Archive photo: Matic Zorman / Maison Moderne

Global fund selectors identified recession as their top economic threat for 2024, with 52% expressing concern, and war and terrorism as a close second at 50%, reported Natixis, forecasting a year of significant volatility. Archive photo: Matic Zorman / Maison Moderne

49% of fund selectors are bracing for an unavoidable recession, yet 66% maintain a bullish stance on bonds for 2024, reported Natixis in its global fund selectors’ outlook survey.

Amidst a complex landscape of potential recession, higher interest rates, geopolitical unrest and moderated growth forecasts, the Natixis Investment Managers’ global survey, indicated that fund selectors are bracing for a challenging 2024, with a keen focus on bonds and a divided stance on equities.

According to Natixis, the survey showed that the investment landscape has undergone significant changes but has evolved gradually due to key economic and market trends since the global pandemic began. This shift represents a departure from the investment experiences of recent years, marking the arrival of a new investment paradigm, stated the report, published last week.

Economic outlook

Recession is seen as the biggest economic threat for 2024 by 52% of fund selectors, who are particularly worried about slower growth prospects. This concern is closely followed by the fear of increasing global tensions, with 50% of the respondents alarmed by events such as Russia’s war on Ukraine, the October terror attack by Hamas and the subsequent Israeli response in Gaza. These incidents highlight the significant impact that war and terrorism can have on the investment landscape. Notably, 49% of those surveyed are convinced that a recession is inevitable in 2024, with opinions almost evenly divided on whether it will occur in the first (44%) or second half (42%) of the year. Compounding these concerns, 59% anticipate a cooling job market and a rise in unemployment in 2024.

Market outlook

66% of fund selectors are bullish on bonds, motivated by higher interest rates aimed at controlling inflation. However, this optimism introduces new challenges for managing fixed income portfolios, especially regarding the timing of duration extension. Additionally, a strong interest remains in private debt and private equity, with 57% and 55% of selectors respectively bullish on these investment types.

However, the stock market presents a less clear picture for 2024. Overall, 65% believe stocks will be more volatile, with 34% of selectors worried about declining consumer spending, leading to divided opinions between bullish and bearish sentiments towards equities. Nonetheless, a majority of 56% remain optimistic about the market's prospects, indicating a nuanced view of future performance.

Product outlook

Fund selectors report that their firms are refining their product offerings to better meet client needs. This includes a 41% increase in the availability of third-party model portfolios and a 37% rise in separately managed accounts, focusing on improving investment customisation and client experience.

However, long-term return expectations have been reduced by nearly 28% from 8.8% to 6.3%.

Despite the backdrop of economic and geopolitical uncertainties, the technology sector remains a beacon of optimism for fund selectors. This sector, driven by recent advancements in artificial intelligence, is expected to outperform, even as concerns over energy prices and the broader economic outlook influence sector-specific expectations, with varying degrees of confidence in sectors like real estate and consumer discretionary spending.

The study covered 500 respondents across 26 countries, collectively managing nearly $35trn. The full 22-page report is available .

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