Across many geographies, the central bank medicine cabinet is now better stocked and has caught up with likely inflation expectations. Inverted yields which have been delaying positioning, are now declining, actual yields are now at levels that appear attractive over longer terms investment horizons. The equity market has been pricing forward uncertainties at a rapid pace, the global economies have still to realise basic improvements in productivity from AI technologies, yet the market continues to price these advancement as if they were certainties. With central banks observing the wealth impact from equity performance, stocks will likely provide adequate earnings and performance in 2024, but the window for opportunity is in the turn in the short term rate cycle. It is time to increase bond exposure. Less risk averse investors will select shorter durations and there remain multiple generational risks, technology must still climb regulatory and implementation hurdles, corporate goals are being reset in line with environmental targets, homelands are being bombed and wealthy energy producing countries are searching for leadership positions or separation. As always however, resilience has prevailed and it is likely will continue to do so. To generate better returns increase exposure to dollar weakness and and lower bond yields.
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