The lack of direction in markets this year has made portfolio management highly complex, with multiple investment themes emerging on a weekly or daily basis and, not surprisingly, many investors have been positioned defensively.

A strong labour market and stickier-than-expected inflation suggests that rates may stay higher for longer, and the global economic growth outlook is at best uncertain. Yet we’re surely getting closer to the end of the extraordinary rate hiking cycle, and even sluggish growth can provide support to equity markets in 2024.

The macro environment is now much different from the benign setting seen in the years after the Global Financial Crisis that enabled both stocks and bonds to rally. The coming year could see more volatility and return dispersion, which is advantageous for active fund managers offering opportunities to exploit market inefficiencies to generate alpha. Fundamental research will continue to play a key role in asset selection but being more aware of the bigger picture will help in fine tuning high conviction portfolios to enhance profitability.

We see opportunities for investors in tactical themes regardless of what the macro environment may be and would argue that sitting on the sidelines is the wrong place for investors to be.

Purely from a valuation perspective, we have a divergent world, and this could provide benefits for value or systematic investors. US stocks are expensive, and that market has been dominated by the so-called ‘Magnificent Seven’ tech mega caps, including Apple, Alphabet and Microsoft. Is it the turn of US small and midcap stocks to outperform?

Europe is cheap on a historical basis and is home to global companies that are exposed to important secular growth opportunities such as demand for computing power and semiconductors, the clean energy transition, biotechnology and consumer affluence and luxury products.

China’s rebound from Covid has been disappointing thus far but may offer some specialist opportunities. Japan and India outperformed in 2023 and may have further to run. UK equities are remarkably inexpensive on a historic basis, yet this market also is home to world-leading companies that are dependent on overseas markets rather than the domestic one.

General elections will be held in 2024 in the US, UK, Mexico, Taiwan, among others, and may bring political change and episodes of market volatility. Geopolitical tensions are an ongoing risk and mean “onshoring’’ will continue as a theme as companies move supply chains to countries that are considered allies. Emerging market economies such as Mexico, the ASEAN region and India are beneficiaries. We see many reasons to be optimistic about equity investing in 2024 and believe that we have entered an environment where high conviction, active fund management will once again prove its relevance and importance within the industry.

The value of active minds: independent thinking

A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.

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