Monthly Investment Outlook – February 2024

Author: Stefano Torti, Group Head of Asset Management & Advisory.

January saw another month of robust performance as the DJIA and S&P 500 indices hit new record highs. The continuation of the year-end rally was driven by three powerful forces: avoiding a recession, moderating inflation, and expecting early and frequent interest rate reductions. However, the pivot party, orchestrated by the Fed, will now be postponed, given January’s surprisingly hot jobs numbers.

The 353,000 new jobs added in January, combined with an upwardly revised 333,000 in December, will make the Fed’s task of cutting rates more challenging. Meanwhile, the U.S. economy continues to defy investor and economist expectations. U.S. GDP grew at a 3.1% annual rate in 2023, despite the ripple effect of the Fed’s 23-month inflation-fighting agenda. The resiliency of the consumer has been consistently underestimated. While a recession may not be imminent, a slowdown in economic growth could occur later this year.

The timing of the Fed’s first rate cut will most likely depend upon signs of softness in payroll data. The Fed’s credibility could be undermined if inflation were to re-accelerate. Ironically, the stronger the U.S. economy gets, the more volatile the credit markets become as the rate outlook appears less certain.

On the emerging risk side, it is also important to notice that after remaining largely out of the headlines for much of the latter half of 2023, commercial real estate turmoil resurfaced in late January, with New York Community Bancorp announcing an increase of reserves while slashing its dividend. Even European lenders such as Deutsche Bank and Julius Baer have disclosed issues with their commercial real estate portfolios.

In the current environment we are comfortable running a small overweight in equities as momentum continues to be supportive; we are however wary of valuations getting richer and also wish to see a larger breadth in order to increase our allocation further.

“ In the current environment we are comfortable running a small overweight in equities as momentum continues to be supportive; we are however wary of valuations getting richer and also wish to see a larger breadth in order to increase our allocation further. ”




Strong US data combined with a good earnings season could further sustain pricing across pro-cyclical pockets. Better growth in the US could sustain a more reflationary backdrop – the correlation between cyclical vs. defensives and breakeven inflation has turned positive in the US.


Valuations for high-quality fixed income look attractive versus their own history and versus equities. Corporate credit net leverage is relatively healthy, but ratings up/down ratio shows divergence.


Commodity security boosts strategic restocking demand, is bullish long-cycle critical commodities, but bearish short-cycle commodities.

Our sub-asset class views

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EQUITIES       GGGG           New all time highs are set but the market continues to be dominated by a handful of stocks, valuations are getting richer for growth stocks but they remain reasonable for mid caps.
US       GGGG           Strip out the ‘AI boom’ and most US companies returns are less compelling. Earnings season underway should provide more clarity.
UK       GGGG           British stocks are still very cheap and GBP appreciation attractive for EUR, USD investors. Growth revised up, but tepid. Inflation seems getting finally under control.
Eurozone       GGGG          
Economic weakness is visible, however a rate cut could finally sustain a rally in small and mid cap stocks.
Switzerland       GEGE GEGE         Quality, defensive nature of the market can play an important role in a portfolio, but the real catalyst will be CHF weakness.
EM       GGGG           China sentiment has never been so bearish, with the market being considered univestable by some. However valuations are extremely attractive.
Japan       GEGE GEGE        
Valuations are getting now slightly extended but momentum is still there.
FIXED INCOME       GGGG           Front end yields make short-dated investment grade bonds attractive, long end has probably repriced too aggressively; more patience to take additional duration risk.
Sovereign Bonds       GGGG           We prefer the short and medium part of the curve, especially for EU and US govies. Avoid Japanese, neutral UK.
Corporate I.Grade Bonds       GEGE GEGE         Short duration high quality IG yielding 5/6% is appealing as the core of a bond portfolio, but is important to have exposure to also longer dated bonds to reduce
reinvestment risk.
High Yield Bonds     RRRR RRRR           Have enjoyed a good run as the US economy stays resilient, we have recently taken profits and closed our position in light of economic headwinds and rising defaults.
E.M. Bonds       GGGG           We are generally cautious on emerging markets due to fiscal imbalances, but our short duration approach achieves yield at acceptable risk.
We like holdings that are genuinely uncorrelated to the main asset classes.
Precious Metals       GEGE GEGE        
Peaking real rates should help the gold price, and trades in its own way to offer diversification.
Hedge Funds       GEGE GEGE A       We aim to create a blend of alternative strategies that offer different return profiles and risk premia to bonds and stocks.
Oil/Commods       GGGG           Commodities are attractive for the long term, due to the demands of net zero, but oil looks to have peaked in the near term as supply has risen.
      =   +    
CURRENCIES               Recent US economic strength will probably limit the pace of rate cuts and hence be more supportive for the USD.
U.S. Dollar (DXY)       GGGG       Repricing of rate cuts and good economic momentum are supportive for the USD short term.
Sterling (GBP)       GGGG       Economic date has been less bad than expected, GBP should show some stability at least until the elections.
Euro (EUR)     RRRR  RRRR       Economic activity is deteriorating in continental and northern europe, with PPI negative in many countries. ECB has less reasons to be restrictive.
Japanese Yen (JPY)       GEGE GEGE GEGEAA   In the long term, JPY has potential to significantly breakout when and if BOJ loosen curve control. November BOJ meeting could be a turning point.
Swiss Franc (CHF)      RRRR RRRR       CHF looks expensive on all metrics, and inflation is now below the SNB target.
EM       GEGE GEGE    
Fiscal situation has deteriorated in several countries, but real rates are still attractive.