Attaching my notes from Man Group's 2024 Economic Outlook Interested to hear thoughts Downloadable PDF at the bottom of the post. Equities (-0.1%) - Wall Street forecasting 5% growth S&P 500 in 2024 - Man Group believe this is unlikely: - As it is following a period of aggressive interest rate hikes at the start of the year and cautious observation following that - Most unfavourable credit conditions since 2007, per Senior Loan Officer Opinion Survery (SLOOS) - Unemployment on a slight rise - Wall Street also projects 140 bps for S&P 500 - Also believed to be unlikely: - Only 3 years of this level has occurred in the last 30 years (1995, 2010, 2021) - Wage inflation continuing to stay high - CPI continuing to rise - Estimate that earnings will be half Wall Street projections Bonds (+4.0%) - Limited magnitude in either direction expected going forward in the short term - 3 Scenarios: - Average (35% Probability) -> UST10 @ 4.9% - Soft Landing (45% Probability) -> UST10 @ 4.3% - Hard Landing (20% Probability) -> UST10 @ 3.3% - %'s estimated using different scenarios of interest rate hikes similar to current situation and subsequent 12 month performance Credit (IG +2.0%, HY +1.8%) - IG and HY spreads both deemed 'unappealing', particularly HY - Current spreads are 106 and 387 bps respectively - Equates to cumulative 5 year default rates of 0.7% and 12% compared to historical averages of 1.0% and 17%, per Moody's data - Historically, flat S&P 500 has correlation with +50 bps of IG and +170 bps of HY - This is in line with historical default rate averages, which Man Group suggest is more realistic and corresponds to +2.0%, +1.8% growth respectively Additional Notes - Bonds are expected to outperform equities and risk parity should be adjusted accordingly - Suggested 7 bond to 3 equity units - Suggestions to avoid equity risk: - JPY -> selling 40% - 50% below value on USD cross, future performance is dependent on Bank of Japan behavior - Brent futures -> more in contango, whereas oil is in backwardation. Be wary of demand driven downturn (2008, 2018 cited as examples) PDF -
Thanks! The analysis is just notes I've taken down. You can find Man Group's full article here - https://www.man.com/maninstitute/road-ahead-bleak-house-2024-outlook
What was their prediction for 2023? If it wasn't a booming Nasdaq then why would anyone listen to them? Did they also predict an explosion in CLOs & Private Credit?
Here is a thought from a Man Group shareholder: I don´t care about their economic outlook but about their revenue generation! A "hedge fund group" with $161B in assets should return more than a LOUSY $1,351B in total revenues and EBIT of $489M. It seems, that the portfolio managers over there are not risk takers but pencil pushers. Share price development is more than miserable in last 5 years.
The Man Group shareholder might be from a place that uses commas as a decimal separator. https://www.localeplanet.com/icu/decimal-symbols.html
Well, obviously. Doesn´t change the fact that Man group has become a home for "elderly portfolio managers"!