Survey: Global conflicts, interest rate trends, and the weakening German economy concern investment professionals in 2024

Promising prospects for emerging markets and thematic investments in technology and pharmaceutical stocks; challenges from falling interest rates and geopolitical tensions: This is what participants in Universal Investment's annual survey expect for the coming year, recommending increased stock quotas and more U.S. securities. Approximately 50 asset managers, representing clients of Universal Investment and UI efa, identified potential risks, including inflation, wars, terrorist attacks and regulatory risks. For the first time this year international experts also participated in the survey.

Thematic investments: Big Tech and Pharma outshine Climate and Environment

Technology and pharmaceuticals equally dominate both nationally and internationally, with each sector garnering 72.5 percent. This suggests the continued success of companies like Apple and Microsoft in investment recommendations. Nearly half of the experts (47.5 percent) recommend infrastructure stocks. Companies focusing on enhanced cyber security are also seen as having significant potential (45 percent). Multiple nominations were possible for this question. Only about 16 percent of participants consider climate change to be a particular threat for 2024. Climate and environmental investments also do not rank highly, with just under a quarter (23.7 percent) recommending such investments to private investors, and an equal number mentioning renewable energies.

Emerging markets with potential – Eurozone stagnation – Germany's economy concerning

A majority of experts expect a declining German economy: Just over ten percent (10.3 percent) anticipate a depression with a decline of more than two percent. Nearly half of the participants (43.6 percent) foresee a recession with an economic decline of up to -0.5 percent, and almost 40 percent (38.5 percent) predict stagnation. For the entire eurozone, more than half (53.9 percent) expect stagnation with economic growth between -0.5 and +0.5 percent. The USA is expected to fluctuate between recovery (31.8 percent) and stagnation (36.4 percent) next year. Asset managers are cautiously optimistic about Asia, particularly China: Over 40 percent (41.9 percent) anticipate growth of more than two percent, and 36 percent (35.9 percent) expect increases of over 3.5 percent. However, compared to China's past growth figures, these are rather modest predictions.

These market expectations are also reflected in the forecasts for the respective indices at the end of 2024:

Accordingly, expectations for the development of the Dollar-Euro currency pair are as follows: 42 percent expect a further decline of the Euro against the U.S. Dollar, 34 percent expect no major changes, and only 24 percent anticipate a strengthening of the Euro.

The biggest challenges for 2024: Geopolitical tensions, inflation, and key interest rates

Unresolved conflicts between or within states are named as the primary danger to capital markets and economies next year, with multiple nominations possible. Nearly three-quarters (74.4 percent) of experts share this view. Over 40 percent (41.9 percent) mentioned wars, such as those in the Middle East or Ukraine. However, half (48.8 percent) believe that markets have already priced in these wars. About a quarter (23.3 percent) expect current conflicts to further fuel market volatility. However, a small proportion ofparticipants (7 percent) see no direct correlation between wars and severe market movements. More than half (53.5 percent) of asset managers still consider inflation one of the biggest threats.

In terms of specific investment recommendations for private investors, survey participants suggest the following for 2024: Investors should allocate about 55 percent in stocks (approximately 46 percent in stocks from industrial nations; 9 percent in emerging market stocks). Due to the turnaround in interest rates, this represents a nearly twelve percentage point decrease in the equity quota compared to the previous year. On the bond side, experts recommend a steady bond quota of 27 percent (23 percent in bonds from industrial nations; 6 percent in bonds from emerging markets). Approximately 4 percent should be invested in real estate, around 7 percent in gold & precious metals, and 2 percent in other assets such as industrial metals and cryptocurrencies.

In terms of regional allocation for 2024, the USA is at the top of the recommendation list with a share of approximately 43 percent (+5 percentage points), followed by investments in Europe at about 29 percent (-9 percentage points), Japan at 8 percent (+2 percentage points), and emerging countries excluding China at 6 percent. China and Asia excluding Japan and China each account for approximately 5 percent, with the rest at 3percent.

Sustainable investments with room for improvement

There is little agreement on how private investors' attitudes toward sustainable investments will evolve in 2024: Half of the participants think demand will remain at the current level. About 20 percent expect increasing interest. However, a significant portion of experts believe interest will wane (17.5 percent), or even collapse completely (10 percent).

This ties in with the thematic recommendations for the next year: If investments in climate or renewable energies do not play a prominent role in advisory discussions, this could also impact demand.