Omnis Managed Portfolio Service

Markets are adjusting to expectations that interest rates may not begin to fall until later in the year.

February 2024 | Monthly update

Market-moving events

Rates may stay higher for longer. Towards the end 2023, markets were optimistic that interest rates would probably begin to fall by late spring or early summer. Central banks have been warning against these expectations since the start of 2024. In response, investors have had to reassess their positions and accept that the first rate cuts may be delayed.

China’s markets have perked up.
Weak economic growth, disinflation and a real estate slump contributed to China’s stock market underperforming last year. Things have picked up in January after the central bank announced a series of stimulus measures. Many analysts expect these to continue over the next few months and revive waning consumer confidence.

Economic data has been mixed.
The latest UK inflation figures have been higher than expected, wage growth has slowed and retail sales fallen. Meanwhile, the US economy grew by 2.5% in 2023, up from 1.9% in 2022. This data suggests central banks will need more time to assess the health of their economies before making any decisions about interest rates.

Investment highlights

Returns have varied. Stock markets delivered mixed returns over January and bonds fell in value. Japanese equities led the way by delivering a return of over 8%. Inflation in Japan is falling again but the Bank of Japan seems set on raising interest rates. US and European stock markets ended the month in positive territory whereas the UK and China fell.

Sentiment is shifting.
Markets are now reassessing last year’s optimistic views on rate hikes despite expectations that most regions will avoid a recession with a soft landing. Central banks have been keen to temper market optimism, and investors will be waiting to see how weak economic data has to get before they signal a decrease in interest rates.

A cautious outlook.
We are maintaining our overweight allocation to bonds and modest underweight to equities. Our outlook is cautious – an economic downturn is possible and an increase in inflation would be a headwind. Our central case is falling inflation, a peak in interest rates and a soft economic landing, but with a larger than normal risk of a deeper recession.

Omnis Managed Portfolio Service

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OMPS Tactical Asset Allocation (TAA) Update

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OMPS 12m rolling activity

OMPS breakdown

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Asset allocation

Take a look at our latest asset allocation in the Omnis Managed Portfolio Service.

Asset Allocation 2nd October

Issued by Omnis Investments, which is authorised and regulated by the Financial Conduct Authority. Registered address: Auckland House, Lydiard Fields, Swindon SN5 8UB. This update reflects our view at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your financial adviser. Omnis Investments is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given. Past performance should not be considered as a guide to future performance. Approved by Omnis Investments on 2 February 2024.

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