2024 has been a good year so far for investors. But now, as we put away the buckets and spades and head into the home straight for the year, how do Irish investment managers see market prospects?
Well, all in all, they seem to be a reasonably positive bunch. Not too concerned about recessions, expecting a string of interest rate cuts and generally seeing more upside in financial markets. Some are a bit concerned about pockets of over-valuation and nearly all talk of political risks – but not enough to spring a market meltdown.
I’ve had a look at what some of the major local players are saying.
Zurich are firmly in the camp of lower interest rates – starting in September in the US with more to come in Europe. In their view, recession fears in the US are overdone and the US consumer remains resilient. Zurich have been broadly neutral in terms of equities and bonds for most pf this year and remain so. Within equity markets their preference is for IT and financials. Zurich have always been very effective in terms of their currency calls and this is a feature of their current allocation.
Positivity also reigns over at Irish Life whose call is to remain invested as they see further upside for both equity and bond portfolios. Some softening in economic growth is likely but this will lead to less inflationary pressure and like all managers they expect interest rate cuts. Political risk in the US may be a feature but any fears over growing deficits are a 2025 or 2026 problem. However this political cycle in their view may lead to heightened volatility as we move into the final quarter of the year
New Ireland also have a constructive view on assets and express this in a clear and succinct fashion. They see the overall economic backdrop as very supportive but feel there may be some risk from the political arena as the year moves on. The risk revolves around the potential for higher tax rates and growing deficits. The fund managers believe that the beginning of a new interest cycle may mark a turning point for bond investors. One caveat they note is to be wary of a bubble in the technology sector.
However the managers at Blackrock hold a more positive view on technology and see a sustainable trend in the theme of Artificial Intelligence. Overall Blackrock feel that US recession fears have been overdone and with a brightening macro environment, it is right to stay overweight risk assets and they feel there are opportunities for investors. They suggest an overweight in US equities and a strategic overweight in Japan. A clear view on government bonds is to prefer short duration over long duration.
The AI theme is echoed over at Amundi, the European giant with significant operations here, but with a more nuanced stance. Amundi feel that there will be winners and losers in this space, and caution that the overall technology sector may need a “reset” in valuation levels, given how far it has already risen. While positive overall on equities, Amundi believe there is better value outside US mega caps. The managers here also see government and corporate bonds as attractive, given where policy rates are headed for the rest of the year. For Amundi, the “window of vulnerability” for markets is in the geo-political sphere. And while this is a long term theme, the outcome of the US election can have impacts beyond North America.
Investment management companies see their role (rightly) as providing long term solutions and are highly unlikely to advise clients to liquidate everything and head for the hills!
Nonetheless it is useful to keep an eye on what they say and the language or nuance they may use. Commentaries will rarely go full negative. Key words to watch out for though are “challenging” “lacklustre” or “headwinds”!
Based on what Irish fund managers are saying today, the message would seem to be “proceed with caution”
Tradewinds 