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Investment Outlook

Q1 2024

Key Takeaways

  1. We think the long-anticipated recession is likely in 2024.

    Though many pundits are calling for a soft economic landing, we still think the lagged effects of high interest rates will wear down consumers and businesses, tipping the economy into recession.

  2. A downturn could be positive for bond prices.

    Historically, interest rates decline, and investors retreat to less volatile investments during recessions, resulting in positive bond returns during downturns dating to 1973.

  3. 2024 stock market performance will hinge on investor focus.

    Sustaining 2023’s positive results into the new year will depend on investors prioritizing earnings and other fundamentals rather than macroeconomic concerns.

  4. We're monitoring key signposts to discern the market’s direction.

    We’ll be keeping an eye on the effect of higher borrowing costs on profit margins and watching for a pullback or cancellations of long-term purchases and megaprojects.

  5. Rate-cutting may bode well for emerging markets (EM).

    Continued central bank easing, particularly in Latin America, has the potential to propel economic growth and create a more favorable backdrop for EM stocks.

  6. It may be time for investors to rethink how to approach asset allocation.

    With credit conditions tightening and interest rate expectations reset at higher levels, it may be prudent for investors to allocate more of their portfolios to fixed income and cash than they’re used to.

References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

International investing involves special risk considerations, including economic and political conditions, inflation rates and currency fluctuations.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

Historically, small- and/or mid-cap stocks have been more volatile than the stock of larger, more-established companies. Smaller companies may have limited resources, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies.

Diversification does not assure a profit nor does it protect against loss of principal.

Generally, as interest rates rise, bond prices fall. The opposite is true when interest rates decline.

Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.