Experts were confident that a recession would come in 2023, and while that is partially true, it looks like it is delayed for the next year. A turtle-like, slow global economy coupled with international war situations will challenge the US economy next year.
Investment professionals are heavily supporting the fundamentals of diversification and investment in low-risk assets in light of uncertain market conditions expected in 2024. As of now, a cautious approach is extremely vital due to the market’s unpredictability and volatility, especially given the struggling world economy with changing geopolitical dynamics, geopolitical conflict, and China’s property crises. Understanding the trend and nature of the global economy along with the interplay of multiple variables is important when evaluating the potential uncertainties that may or may not cause the recession in 2024.
There are no guarantees in life. A different variety of assets in a portfolio is the only way to minimize risk. Distributing risk across several investments, different asset classes, and multiple industries helps an investor diminish their exposure to any single investment. Investing in assets with low risk, such as dividend-paying stocks and government bonds, just to name a few, will allow an investor to achieve a balance between gains and stability while protecting the portfolio from uncertain conditions.
Experts fear that to curb inflation, the Federal Reserve might raise interest rates. Although the rise in interest rates is sometimes vital and beneficial in the long run, it has negative effects on the economy in the short run. The possibility that climbing interest rates may cause the economy to slow down is one of the key worries. An increase in interest rates makes borrowing difficult for consumers and businesses, which affects less investment and spending. Financial markets also react negatively to increased interest rates and become volatile.
The global trade system is another area of uncertainty. Geopolitical conflicts are constantly affecting global trade and causing trade disputes. Considering the current situation, if long-standing trade disputes aren't resolved, it could affect American companies by limiting their access to foreign markets. In such cases, low-risk assets and diversified portfolios are the only available options for investors.
According to the survey conducted by MFS Investment Solution Group, managers are shifting their focus to various other asset classes, Some are looking to invest in infrastructure projects while others maintain a ratio between private equity and debt.
The managing director of MFS Investment Solution Group, Johnathan Barry, said, “Being mindful of risks and valuations while seeking portfolio diversification makes sense at this stage of the cycle."
In conclusion, the US government needs to take certain important steps to stop the recessionary waves in the US by 2024. However, even after that, there could be uncertain conditions. Investment experts are confident that diversification and low-risk assets could become the superheroes to save the economy.
Key Takeaways
- Investment experts are assured that there could be an economic downswing in 2024 in the US.
- The Federal Reserve might raise interest rates to curb inflation.
- Diversification of portfolios can bring a balance between gains and savings.
