As we head into Q4 2024, market conditions are growing more challenging. The global economy faces the increasing threat of a recession, leading analysts to adjust expectations for corporate earnings. In the U.S., stocks—particularly tech—have enjoyed strong gains, but high valuations can’t last forever. The “Magnificent Seven” tech stocks that fueled much of the market’s upward momentum are now slowing. While growth is cooling, opportunities remain in sectors like healthcare and energy.
Swiss equities are likely to hold up better due to their defensive nature, while Eurozone stocks could feel pressure from China’s economic struggles and softer earnings. Meanwhile, emerging markets, especially in Asia, could still see growth, driven by fiscal stimulus and advancements in AI.
Central banks, including the Fed and ECB, have begun cutting interest rates, with the Fed sitting at around 4.75%-5.00%. More rate cuts are expected going into 2025, marking what some call the “great easing.” While this monetary easing aims to prevent a downturn, it’s unclear if it’ll be enough to avoid a recession. As rates decline, we anticipate lower yields and a steeper yield curve in 2024, with the U.S. 10-year Treasury yield potentially dropping to 3.75% by year-end. Government bonds are increasingly attractive as a hedge, while high-yield bonds offer opportunities for those willing to take on a bit more risk.
Gold has been a standout performer in 2024, benefitting from lower U.S. real yields and a weakening dollar. Physical demand and rate cut expectations have driven prices higher, and by the end of Q4, gold could reach $2,700 per ounce.
As we approach the end of 2024, caution is key. Equity markets are becoming more volatile due to high valuations and slowing growth. In contrast, fixed-income assets, particularly government bonds, are becoming more appealing as interest rates fall. Gold and other commodities offer solid defensive options as the global monetary easing cycle plays out. This period will likely see continued market volatility, so maintaining a balanced portfolio with a focus on quality is crucial.
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