Capital Ideas^TM

Heading into 2024, it is difficult to remember another time when the outlook was so uncertain. Recession or expansion? Inflation or deflation? Higher interest rates for longer or central banks preparing to pivot? Take your pick and you will find a pundit arguing for each scenario as if it was a foregone conclusion.

As long-term investors, Capital Group prefers to focus on larger trends, events that may shape not just the next year, but the next decade or more. In our Outlook 2024, Capital Group’s chairman and chief investment officer Martin Romo uses the analogy of the daily weather report versus changes in long-term weather patterns. While many others are concerned about the near-term forecast, Capital Group is looking for signs of large-scale change — those events and trends that could have a significant impact on companies, industries, economies and the world at large.

Along those lines, here are some questions we are asking today: How will rapid advancements in artificial intelligence alter the way companies do business and which are positioned to win the AI race?

Will electricity, wind and solar power displace fossil fuels as our primary source of energy and how long might that process take?

In the bond market, with US Treasury yields near 16-year highs, are we at the start of a historic opportunity as real income returns to the fixed income universe?

On the other hand, we must be wary of gathering storm clouds. Will rising government debt levels lead to lower economic growth? How might worsening tensions between the US and China affect global trade? What is the risk that wars in Ukraine and the Middle East spill into wider fields of conflict? And, in a pivotal US election year, will volatility keep nervous investors on the sidelines?

Large-scale change can bring a high degree of volatility but also unprecedented opportunities – and that is prime time for active investing. Against this backdrop, here is our 2024 Outlook report.