Investment Outlook – July 2024
INTRODUCTION Investor risk appetite should remain strong as central banks ease policy in response to lower inflation. Broadly speaking,...
In the current late-cycle environment, this may be the case. Stricter lending standards and stress within the financial sector are not welcomed events. However, with regard to inflation, tighter overall financial conditions should limit credit availability and, in turn, limit consumer and business borrowing and spending.
Central banks appear willing to use the lending channel and a hit to economic growth to bring inflation back to target levels. Does that mean an economic recession is on the horizon in the United States? We estimate that there is at least a 50% chance of recession within the next six months.
Macro DriversSince the banking sector developments in March, financial sector stress and the potential for additional bank failures have drawn investor focus. But in our view, investors should not forget about inflation risk.
[1] Source: US Bureau of Economic Analysis, as of 30 March 2023. |
![]() |
Corporate CreditCredit spreads across several corporate benchmarks have widened to reflect increased risk of a downturn, but have yet to reach their 2023 high point.
|
![]() |
Government Debt& PolicySwift action by US and European governments may have prevented a more protracted financial panic.
|
![]() |
CurrenciesThe US dollar typically performs well when there are macroeconomic risks bubbling over abroad.
|
![]() |
EquitiesWe believe tighter financial conditions, less pricing power and declining margins should lead S&P 500 consensus earnings estimates around 10% lower from the current $220 level.[2]
[2] Data as of 3 April 2023. |
![]() |
Potential RisksA cautious asset allocation stance with a tilt toward fixed income is warranted in our view given macroeconomic headwinds and a corporate profits recession appearing to take hold.
|
![]() |
By Craig Burelle, VP, Senior Macro Strategies Research Analyst
The information in this article is provided for general information purposes only and does not take into account the investment objectives, financial situation or needs of any person. Investors Mutual Limited (AFSL 229988) is the issuer and Responsible Entity of the Loomis Sayles Global Equity Fund (‘Fund’). Loomis Sayles & Company, L.P. is the Investment Manager. This information should not be relied upon in determining whether to invest in the Fund and is not a recommendation to buy, sell or hold any financial product, security or other instrument. In deciding whether to acquire or continue to hold an investment in the Fund, an investor should consider the Fund’s Product Disclosure Statement and Target Market Determination, available on the website www.loomissayles.com.au or by contacting us on 1300 157 862. Past performance is not a reliable indicator of future performance. Investments in the Fund are not a deposit with, or other liability of, Investors Mutual Limited and are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Investors Mutual Limited does not guarantee the performance of the Fund or any particular rate of return.
Register to receive regular performance updates and regular insights from the Loomis Sayles investment teams, featured in the Natixis Investment Managers Expert Collective newsletter.
Loomis Sayles marketing in Australia is distributed by Natixis Investment Managers, a related entity. Your subscriber details are being collected on behalf of Loomis, Sayles & Company, and Investors Mutual Limited (the RE for Fund) by Natixis Investment Managers Australia. Please refer to our Privacy Policy. Natixis Investment Managers Australia Pty Limited (ABN 60 088 786 289) (AFSL No. 246830) is authorised to provide financial services to wholesale clients and to provide only general financial product advice to retail clients.