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The resilience of the US economy, which avoided a catastrophe scenario in 2023, is a positive indication that interest rates and inflation will ease, according to Guy Wagner, Chief Investment Officer of the asset management company BLI - Banque de Luxembourg Investments.

Listen to the full podcast

 
  • What will you remember most about 2023?
  • What explains the difference in performance between the US and European economies?
  • Is US resilience a precursor for Europe?
  • Economic indicators to be closely watched
  • What is the ECB’s monetary policy expected to be in 2024?
  • The difficulties facing the Chinese economy
  • The markets’ main performance drivers in 2023
  • Outperformance of the ‘Magnificent seven’
  • How did the bond market fare in 2023?
  • What investment opportunities will 2024 offer?
  • Why favour equities over bonds?
  • What are the likely trends for gold in 2024?
  • The impact of the upcoming elections on the markets

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Guy Wagner, what will you remember most about 2023?

“Above all, the surprising resilience of the US economy. At the beginning of the year, people were worried about the risk of recession, but growth has held firm. This was a major factor in conditioning some of the ways the financial markets behaved.”

In Europe, by contrast, growth has stalled and some economies are in recession. How do you explain this difference?

“The United States are still benefiting from the positive effect of savings accumulated during the Covid pandemic, which is now helping to boost consumption. It should also be noted that the US public deficit remains very high, and that substantial public spending is helping to stimulate growth, while the unemployment rate remains low.”

Is this encouraging for the European economy?

“It is difficult to see where a short-term upturn in growth in Europe might come from, given the relative weakness of the global economy. But psychological factors also need to be taken into account, and it will be important to keep a close eye on consumer confidence, as well as that of businesses when it comes to investing.”

The financial markets had a good year in 2023. What drove this growth?

"As I said, the idea that the US economy has not fallen into recession and is instead managing a soft landing has helped to put the brakes on monetary tightening and interest rate hikes. At the same time, company profits have continued to grow, an ideal scenario for boosting share prices. Nonetheless, the rise in the markets was mainly concentrated in technology stocks with much less of a contribution from other sectors.”

As the new year gets underway, what investment opportunities do you see?

“Overall, the markets are anticipating an optimistic scenario of falling interest rates and growth in corporate profits. I still believe that, fundamentally, over the medium to long term, equities should be favoured over bonds. And within equities, we like the Japanese market a lot.”

What about gold, which had a very buoyant year in 2023?

“The medium- and long-term trend is clearly upwards. Last year, the gold price was surprisingly strong. Normally, when interest rates rise, there’s a negative impact on gold which doesn't pay interest. But, in 2023, despite the rise in interest rates, gold appreciated by 13% against the dollar and the euro, mainly due to strong physical demand from central banks in emerging countries. They are likely to continue purchasing gold this year. And if interest rates fall again, financial demand could be added to physical demand, which could further support gold’s upward trend.”