By BNY Investment Management

The BNY Mellon Multi-Asset Income Fund is moving from risk bucket 6 to 5. In this blog we consider the rationale for this re-classification.

As of 17 May 2024, the BNY Mellon Multi-Asset Income Fund (MAIF) has been reclassified as Dynamic Planner Risk Rating 5. This reflects the fund’s robust risk management framework, at the forefront of which is the multi-asset team, who actively manage risk and return on a daily basis and who participate in the processes of idea generation, sharing, evaluation and implementation in portfolios.

As a reminder, MAIF has been a Dynamic Planner Premium Rated Fund1 for several years2 and will carry this across to the new risk bucket.

Launching in February 2015, the Fund aims to achieve income together with the potential for capital growth over the long-term (5 years or more). The Fund invests in a diversified range of assets, from equities and bonds to alternative assets.

Income is targeted at portfolio level, allowing the manager to determine where best to achieve income and where to seek capital growth. Globally focused, proprietary research that incorporates environmental, social and governance (ESG)3 considerations is a hallmark of Newton’s investment process.

If you would like more information, please visit the fund centre here or email BNY Mellon Investment Management at

  1. Dynamic Planner Risk Ratings should not be used for making an investment decision and it does not constitute a recommendation or advice in the selection of a specific investment or class of investments
  2. As at September 2023.
  3. Investment decisions are not solely based on environmental, social and governance (ESG) factors and other attributes of an investment may outweigh ESG considerations when making decisions. The way that material ESG factors are assessed may vary depending on the asset class and strategy involved and ESG factors may not be considered for all investments.

Performance track record

YTD 2023 2022 2021 2020 2019
BNY Mellon Multi-Asset Income Fund 3.36% 4.09% 0.34% 9.32% 35.15% -12.1%
Benchmark 3.02% 13.2% -3.31% 5.51% 22.75% -1.65%

Source for all performance: Lipper as at 30 April 2024. Fund Performance for the Institutional Shares W (Accumulation) calculated as total return, including reinvested income net of UK tax and charges, based on net asset value. All figures are in GBP terms. The impact of an initial charge (currently not applied) can be material on the performance of your investment. Further information is available upon request.

Benchmark: The Fund will measure its performance against a composite index, comprising 60% MSCI AC World NR Index and 40% ICE Bank of America Global Broad Market GBP Hedged TR Index, as a comparator benchmark (the “Benchmark”). The Fund will use the Benchmark as an appropriate comparator because the Investment Manager utilises this index when measuring the Fund’s income yield.

The Fund is actively managed, which means the Investment Manager has absolute discretion to invest outside the Benchmark subject to the investment objective and policies disclosed in the Prospectus. While the Fund’s holdings may include constituents of the Benchmark, the selection of investments and their weightings in the portfolio are not influenced by the Benchmark. The investment strategy does not restrict the extent to which the Investment Manager may deviate from the Benchmark.

The fund can invest more than 35% of net assets in different Transferable Securities and Money Market Instruments issued or guaranteed by any EEA State, its local authorities, a third country or public international bodies of which one or more EEA States are members.

Past performance is not a guide to future performance.

The value of investments can fall. Investors may not get back the amount invested. Income from investments may vary and is not guaranteed.

Important information

For Professional Clients only. This is a financial promotion.

For a full list of risks applicable to this fund, please refer to the Prospectus or other offering documents.

Please refer to the prospectus and the KIID before making any investment decisions. Go to
Any views and opinions are those of the investment manager, unless otherwise noted. This is not investment research or a research recommendation for regulatory purposes.
For further information visit the BNY Mellon Investment Management website: Doc ID: 1916807. EXP: 16 September 2024.

By Andrzej Pioch, Lead Fund Manager, L&G Multi-Index Funds

A typical broad global equity benchmark has around two-thirds of its stocks domiciled in the US1. Perhaps unsurprisingly, global equity indices therefore share the majority of their top 10 constituents with US equity indices, and the typical overall portfolio overlap between the two is currently over 60%2.

Comparing the S&P 500 index’s top five holdings in 2009 versus today, they share only one name – Microsoft – and the concentration in top holdings has also increased from 10% to over 26% as at 25 January 2024. This has resulted in recent positive US equity index performance being driven by a relatively small number of stocks, namely the ‘Magnificent 7’ of Apple*, Amazon*, Alphabet*, Meta*, Microsoft*, Nvidia* and Tesla*. We believe this poses concentration risk not only for investors who hold US index exposure, but also for multi-asset strategies that hold global equity indices with common underlying exposure.


What can we do about it?

Some multi-asset strategies that align their equity exposure with global equity indices may increasingly look like a material bet on mega-cap tech companies becoming even larger. So, what can investors do to manage that risk?

They could always move back to active management for their equity exposure, where the manager might lower exposure to the ‘Magnificent 7’ and offer exposure to other themes that they believe could provide more attractive risk-adjusted return potential. However, this may introduce other types of stock-specific risk given the active nature of the approach and may potentially increase costs.

If they would like to preserve the simplicity and transparency of the index approach, they essentially have three options:

  1. Use regional equity indices to build a more geographically-balanced equity portfolio. This preserves the transparency of the market-cap weighted index approach within individual regions, but lowers reliance on US stocks and in particular US mega-cap tech within the overall portfolio.
  2. Complement their global market-cap exposure with a single- or multi-factor equity index exposure, which will tilt their exposure towards equity factors that have been shown to reward investors with long-term premia such as value, low volatility, quality, size or momentum.
  3. Complement their market-cap exposure with equal-weighted investments leveraging emerging areas shaping our future. When identified and designed carefully, thematic portfolios can potentially act as a diversifier, while providing access to important areas such as clean energy, access to clean water and cyber defence.

In our L&G Multi-Index range, we seek the cost-effectiveness, diversification and transparency an index approach can deliver to individual asset classes, and then we combine this with dynamic asset allocation.

With a wide range of L&G index funds at our fingertips, we don’t need to accept global benchmarks’ implicit biases or concentration risks. That’s why we seek to spread our equity risk across a number of regional equity indices and gain exposure to long-term thematics via well-diversified L&G ETFs.

For example, while we are positive on artificial intelligence (AI), we don’t believe the ‘magnificent seven’ are the only companies set to benefit from this theme. We have spread our allocation equally over approximately 60 companies with distinct portions of their businesses and revenues derived from AI, that have the potential to grow in this space.

While certain index benchmarks have become increasingly concentrated, when introducing new risks to index investors we need to be careful not to throw the index baby out with the bathwater.

We think the innovation and ingenuity we have seen in this space makes index investing an exciting area to explore, not just for growth investors but also those looking for potential higher income, or who want to go further when it comes to ESG investing. That’s why they are a core foundation of our entire Multi-Index fund range.


1 The MSCI World, for instance, has a 69.7% allocation to US stocks. Source:
2 Nine of the top 10 portfolio holdings are the same in the S&P 500 and the MSCI World, and the overall portfolio overlap is around 66%. Source: Bloomberg data using ETFs as a proxy of index compositions, as of 02 October 2023

Key risk warnings

The value of investments and the income from them can go down as well as up and you may not get back the amount invested.

Past performance is not a guide to future performance. *The details contained here are for information purposes only and do not constitute investment advice or a recommendation or offer to buy or sell any security. The information above is provided on a general basis and does not take into account any individual investor’s circumstances. Any views expressed are those of LGIM as at the date of publication. Not for distribution to any person resident in any jurisdiction where such distribution would be contrary to local law or regulation. Please refer to the fund offering documents which can be found at

This financial promotion is issued by Legal & General Investment Management Ltd. Registered in England and Wales No. 02091894. Registered office: One Coleman Street, London EC2R 5AA. Authorised and regulated by the Financial Conduct Authority. Legal & General (Unit Trust Managers) Limited. Registered in England and Wales No. 01009418. Registered Office: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority, No. 119273

Fidelity Portfolio Manager Talib Sheikh discusses the current outlook across the income complex and why high-quality assets are prudent given the risks to growth.

What is your investment outlook for 2024 given the prevailing macro environment?

Risk appetite grew significantly towards the end of 2023. Strong economic data in the US and falling inflation gave many investors confidence that the current cycle could continue for even longer. However, we believe a little more caution is warranted. Our base case for a cyclical recession has not changed, although the ongoing strength of the US economy in the face of much higher interest rates means that the growth contraction is likely to come later in the year.

Although we expect developed market central bank rates to fall in 2024, we doubt the number of cuts currently priced in by the market will materialise. Nevertheless, interest rates are still high compared with recent history, and this will eventually create stress on corporate growth and earnings, weakening the medium-term fundamental outlook. At the same time, we recognise that this cycle could have further to run, hence, we are happy to be taking some risk selectively, such as European and Japanese banks, energy and UK large-caps.

Emerging markets, however, are at a different part of their monetary and inflation cycle. They have led developed markets in raising interest rates to combat inflation. Now, with inflation falling, they are beginning to reverse their monetary policy.

What do you think could surprise markets in 2024?

While markets remained broadly resilient in 2023 and have embraced a ‘soft-landing’ narrative, we believe the fundamentals are weakening and risks are not adequately priced in. Data that contradicts a soft landing will likely cause volatility. We therefore remain overall cautious on risk assets but also remain flexible in our approach to capture market opportunities as and when they arise.

What worked well in your portfolios over 2023?

While 2023 was a challenging year for total returns, we used the strategy’s flexibility to capture market opportunities and hedge unwanted risks. Equities were a strong contributor to returns, especially our relative value bets in energy and financials. We still like these sectors for their attractive yields. Global and Japanese equities also contributed to performance, as did emerging market local currency debt. We retain exposure in specific countries, such as Brazil and South Africa, and are looking to add to our broader emerging market debt local currency exposure as the backdrop is becoming more positive Hybrids, an area of strong conviction, have helped performance.

As inflation decelerates and interest rates remain high, bonds appear to be an appealing investment option. We are looking to deploy nominal and inflation-linked government bonds to capture high yields and inflation protection.

Where are the key areas of opportunity in 2024?

We anticipate that growth will slow and then contract towards the end of the year and hence believe an overall cautious stance is warranted. We prefer high quality dividend style equities and are taking risk selectively. We also have a bias towards high quality duration assets which stand to do well as growth deteriorates.

We remain cautious on higher risk credit, especially developed market high yield bonds, as we expect defaults to rise due to central bank policy and deteriorating growth. We also like emerging markets, where real yields are attractive in countries such as Brazil and South Africa, while opportunities also exist in equity markets that are trading at attractive valuations.

Important information

This information is for investment professionals only and should not be relied upon by private investors. Past performance is not a reliable indicator of future returns. Investors should note that the views expressed may no longer be current and may have already been acted upon. Fidelity’s Multi Asset Income funds can use financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Changes in currency exchange rates may affect the value of investments in overseas markets. Investments in emerging markets can be more volatile than other more developed markets. The value of bonds is influenced by movements in interest rates and bond yields. If interest rates and so bond yields rise, bond prices tend to fall, and vice versa. The price of bonds with a longer lifetime until maturity is generally more sensitive to interest rate movements than those with a shorter lifetime to maturity. The risk of default is based on the issuers ability to make interest payments and to repay the loan at maturity. Default risk may therefore vary between government issuers as well as between different corporate issuers. Sub-investment grade bonds are considered riskier bonds. They have an increased risk of default which could affect both income and the capital value of the fund investing in them. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Issued by FIL Pensions Management, authorised and regulated by the Financial Conduct Authority and Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited.


As inflationary fears ease, multi-asset investors should ignore wider market distractions and stay focused on investing in the right asset classes, at the right time for the current stage of the financial cycle, says Newton head of mixed assets investment, Paul Flood.

Key points:

Is inflation finally coming under control? After months of interest rate rises and concerted efforts by central banks such as the US Federal Reserve to ease inflationary fears, the measures appear to be working. November 2023 saw US inflation levels cool to 3.1% from a high of 9.1% in June 2022 with the UK market also showing a modest fall.

Yet while Newton’s Flood acknowledges the UK has seen its biggest drop in inflation in the UK since the early 1990s, he believes the economic outlook remains uncertain, with recession a strong possibility in 2024.

“Inflation is still quite high so we are not out of the woods yet,” he says. “A lot will depend on energy prices. As we go through the next 12 months we may find that the US economy remains resilient and we need to see wage inflation come back down to see what the US Fed does next.”

In this current uncertain backdrop, Flood believes it important investors keep a tight focus on the key assets most likely to generate strong returns.

“Investors need to avoid the short-term noise and focus on the bigger picture while trying to ensure they are investing in the right asset classes at the right time at the right stage of the financial cycle,” he says.

Bond boost

From an asset standpoint, the key question is: which way should investors turn next? According to Flood, both threats and opportunities abound in current markets, albeit with investors facing considerable risk and volatility. While he describes 2023 as a “less than stellar year” for alternative investments such as renewable energy, Flood still believes they remain broadly attractive.

Across more mainstream asset classes, Flood says bond markets in particular are showing signs of real recovery after a “horrible” 2022.

“Bond yields are looking increasingly attractive both here and in the US from the long end, in our view. After over a decade of mediocre relative real yields investors are now getting some true inflation protection from fixed income,” he adds.

While Flood also sees strong pockets of opportunity in equity markets, he points out that much of their success in 2023 was driven by large US technology companies, particularly the so-called ‘magnificent seven’, with a more mixed performance elsewhere.

“While equity markets have performed quite well in recent months, the success of the magnificent seven has tended to overshadow weakness among some other companies and sectors. For many equity investors it has actually been quite a challenging year, though price/earnings ratios do look to be improving and the equity market picture remains balanced as fiscal spending has remained supportive,” he adds.

For Professional Clients only. Any views and opinions are those of the investment manager, unless otherwise noted. This is not investment research or a research recommendation for regulatory purposes.

For further information visit the BNY Mellon Investment Management website:

ID: 1695190 Expires: 14 June 2024

By TIME Investments

Market landscape

Inflation has been one of the key macroeconomic drivers of investment performance over the last 18 months and this will likely persist into 2024, albeit to a lesser extent. We have however started to see a shift, with annual inflation in the UK and other Western major economies now well below its peak. The debate, therefore, has largely moved to when UK CPI will meet the Bank of England’s (BoE) 2% target. The BoE itself forecasts this to occur in calendar Q2 2025 but the performance of the UK economy could influence this timing heavily according to market forecasters. Capital Economics estimates that UK CPI could be below 2% before the end of 2024 with a large element of this a weakening of economic growth, and potentially a recession early this year.

Inflation will be a key factor in any BoE decision making when it comes to the pathway of interest rates. According to a Reuters poll taken on the 9 November, consensus forecasts estimate that the UK base rate will remain at the current 5.25% level until calendar Q3. From here consensus forecasts the base rate to decline over the final two quarters of 2024 to 4.5% and then to 4.0% by Q2 2025. Central Banks, including in the UK and US have been firm in stating that interest rates will be kept at least at their current levels until inflation is clearly on track to meet central banks targets. However, some influential rate-setters in countries including in the UK have added support to potential rate cuts in 2024 with data looking broadly supportive in late 2023 and early 2024.

The impact on Real Assets

Real assets, particularly those that seek to provide long-term income, have been heavily influenced by changes to monetary policy and this will likely continue in 2024. A large proportion of infrastructure and real estate investment valuations are directly or indirectly influenced by government bonds. This has been a negative influence over the past twelve months but could now start to create more favourable conditions. In the past, we have seen that increased confidence in the downward pathway in interest rates has supported lower long-term UK government bond yields and we saw some early evidence of this in the last two months of 2023. Traditionally, this has been a catalyst for the stabilisation of real asset capital values, before leading to a return to growth. The conditions for 2024 will likely be more supportive than much of 2023 for real assets, including listed infrastructure.

Returns when investing in Infrastructure

Whilst both heavily influenced, listed infrastructure is generally more sensitive to bond yields than listed real estate. Most sectors we target acquire assets with long-term cash flow streams, often with income linked to inflation meaning that the securities act as an indexed-fixed income proxy, in an equity wrapper. A number of the securities we have invested in saw their share prices negatively impacted by rising longer-dated UK government bond yields. Reducing bond yields will likely see many sectors see greater stability in their portfolio values in 2024. Income in the meantime has remained very resilient with many sectors seeing persistent income growth, often translating into growing dividends.

Whilst political risk is elevated in a general election year, UK infrastructure looks well supported by the two main Westminster parties. In October 2023, shadow chancellor, Rachel Reeves, stated that a Labour government would, “get Britain building again,” and plans would “accelerate the building of critical infrastructure for energy, transport and technology.” UK public debt remains highly elevated and though infrastructure has been an easy target for spending cuts such as in the early 2010s, there seems to be a greater understanding of the need for continued, well-targeted infrastructure investment, further creating confidence.

For more information on our offering, including the key risks of the fund, please visit our website (

TIME Investments is a trading name of Alpha Real Property Investment Advisers LLP which is the Investment Manager of the Fund with delegated authority from Alpha Real Capital LLP, the authorised corporate director of the Fund, both of which are authorised and regulated by the Financial Conduct Authority. Please note investors capital is at risk.

By Sarasin & Partners

Just how does an adviser go about identifying the best MPS providers for their specific needs?

Increasingly onerous regulations are prompting many IFAs to partner with discretionary fund managers (DFMs), and utilise platform-based model portfolio services (MPS). That said, choosing the right DFM partner can be daunting. So how does an adviser go about identifying the best MPS providers for their specific needs?

Focus on performance

It may be tempting to choose a DFM who has achieved short-term outperformance, but performance should be measured with care. For example, it is not unusual to find that last year’s worst-performing fund manager achieves top-quartile performance this year.

Periods of three to five years and longer provide a more informed view. It is also important to consider performance over discrete, one-year time periods to ascertain whether five-year performance is due to outperformance over a very short time period, or achieved gradually. Risk-adjusted performance is also important and a key indicator of whether an investment process will provide smooth or stop-start returns.

Sensible costs and value for money

Fees have long been a central consideration when evaluating any investment product or service. But it’s not just these costs that an adviser must consider – platform charges, wrapper costs and the adviser’s own fees must also be accounted for.

Under MiFID II legislation, DFMs must provide a breakdown of the total cost of their investment services, including transaction costs, so advisers can now scrutinise costs and compare DFMs more easily. Costs should also represent fair value. Under Consumer Duty regulations, DFMs are required to provide value for money analysis of their MPS.

Solvency and robustness

When evaluating the financial strength of a DFM, an independent measure of an investment manager’s financial strength such as an AKG rating can provide a useful third-party view. Recent or planned changes of ownership should also be considered.

Attentive service and clear communication

Good two-way communication is fundamental to forming a close business relationship, developing trust and retaining confidence. DFMs should be in regular communication with their advisers, keeping them abreast of investment views and how portfolios are positioned. They should also inform advisers of upcoming rebalances and say why the changes are being made.

First impressions count. A client’s first encounter with an MPS service is often via client-facing literature. Well-presented and clearly-written client literature – perhaps with the option of dual-branding – can go a long way to enhancing your client’s experience.

Team and culture

Running a successful MPS over a multi-year period requires an experienced and skilled portfolio management team. But experience and skill may count for nothing if the portfolio managers aren’t well supported by administrators, fund researchers, economists, strategists and a dedicated risk office.

The investment process should not rely on any one individual and investment decisions should be scrutinised by peers. Risk controls should ensure portfolios are managed in accordance with the agreed mandate and risk parameters.

Enhancing your MPS selection

Many advisers split larger client accounts between several DFM partners to achieve additional diversification. Blending DFMs that have different approaches and performance outcomes can help provide a smoother return profile across the economic cycle.

Take time to decide

Partnering with discretionary fund managers is an increasingly attractive proposition for many IFAs. But with a vast array of DFMs and investment strategies to choose from, finding the best fit can take time. Being armed with the relevant selection criteria and a checklist of questions are essential first steps in exploring whether to partner with a DFM.


If you would like to discuss any of the issues mentioned in this article, please contact Sarasin and Partners:

T +44 (0)20 7038 7000

If you are a private investor, you should not act or rely on this document but should contact your professional adviser. The value of your investments and any income derived from them can fall as well as rise and you may not get back the amount originally invested. Past performance is not a guide to future returns and may not be repeated. Sarasin & Partners LLP is a limited liability partnership registered in England and Wales with registered number OC329859 and is authorised and regulated by the Financial Conduct Authority.

© 2023 Sarasin & Partners LLP – all rights reserved.

by Paul Pugh, Head of Strategic Alliances, Canada Life Asset Management

At Canada Life Asset Management (CLAM), we understand that having the most effective tools at your disposal, especially when markets are volatile, can help you deliver more attractive gains for your clients. Themes we explored in detail at March’s Dynamic Planner Conference included:

What is behavioural finance?

Behavioural finance is the understanding of how human emotion can shape investment behaviours –behavioural biases. Understanding these biases can be a powerful tool for advisers when advising clients, by helping to gain a deep understanding of their motivations and how they react to market shifts. Unlike institutions, which tend to have very clear definitions of risk, an individual investor is more likely to have feelings about risk, and for them risk analysis is an emotional process.

Behavioural biases can skew investors’ perceptions, causing them to allow shorter term market movements to dictate longer term goals. By identifying and managing these biases, advisers can steer clients for better outcomes. We believe that this is a better way of achieving a ‘real world’ picture of investors’ behaviour and motivations than solely relying on data – reflecting the way the FCA wants advisers to approach the Consumer Duty.

How can advisers use an understanding of behavioural biases to help clients?

There are a range of behavioural biases, which fall into two main categories: cognitive (rooted in logic (albeit flawed)) and emotional (which have an irrational basis).

One example of a cognitive bias is recency bias: as some investors have experienced following the rise in cash yields, it is possible to focus on the most recently available rates (which happen to be the most attractive) – but ignore the longer returns history compared with investing in financial markets. By contrast, loss aversion is an emotional bias, whereby the loss of a certain sum is felt much more powerfully than a gain of the same value.

Our presentation explored different approaches for advisers in helping clients overcome both types of behavioural biases.

Risk-targeted investing: The WS Canlife Portfolio III-VII Funds

Of course, fund managers are also susceptible to behavioural bias. Our process-driven approach to risk-targeted investing helps to mitigate this by managing to a specified asset allocation.

Find out more

Important Information

The value of investments may fall as well as rise and investors may not get back the amount invested.

The WS Canlife Portfolio Funds may invest in property funds that may be illiquid and subject to wide price spreads, both of which can impact the value of the funds. The value of the property is based on the opinion of a valuer and is therefore subjective.

This article is issued for information only by Canada Life Asset Management. This article does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available in the literature section.

Canada Life Asset Management is the brand for investment management activities undertaken by Canada Life Asset Management Limited, Canada Life Limited and Canada Life European Real Estate Limited. Canada Life Asset Management Limited (no. 03846821), Canada Life Limited (no.00973271) and Canada Life European Real Estate Limited (no. 03846823) are all registered in England and the registered office for all three entities is Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Asset Management Limited is authorised and regulated by the Financial Conduct Authority. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Promotion approved 30/01/24

Sunil Krishnan from Aviva Investors highlights the key themes for multi-asset investors to monitor in 2024.

Read this blog to understand:

The decade so far has been a turbulent period for the global economy. The pandemic roiled markets and interrupted the smooth working of supply chains. In February 2022, just as economies started reopening after COVID-19 lockdowns, Russia’s invasion of Ukraine added significant inflationary pressures. Central banks launched an aggressive monetary tightening cycle to tackle rising prices, which radically altered the market landscape. The economic effects are still playing out.

We see scope for further disruption in 2024. Billed as the biggest election year in history, 2024 will bring a sequence of major elections across the world, with the outcome in many cases too close to call. Central banks must decide if and when to cut rates, now that inflation has started to fall in many economies.

The hype surrounding generative artificial intelligence (AI) technology is set to continue, affecting equity markets. And questions remain over China’s economic policies and growth trajectory. So how will these four themes affect investors with a multi-asset focus?

1. Politics will be a dominant theme in 2024, as four billion people – 41 per cent of the world’s population – go to the polls. The US and Taiwanese elections might have the biggest effect on markets

The US, UK, India, Indonesia, Russia, Taiwan: some of the world’s most populous and economically important countries are set for general elections in 2024 – although not all of these votes will be deemed free and fair.

The UK general election is expected towards the end of the year (it could happen as late as January 2025). Our view is that in the possible event of a change in government, this might result in longer-term policy changes – for example on fiscal spending and tax policy – but UK politics will likely not have a big impact on global markets in the near term. The US presidential and Taiwanese elections are potentially more consequential.

In the US, the candidate most likely to disrupt existing economic arrangements is former president Donald Trump, who is running for the Republican nomination and enjoys a strong lead in early polling ahead of the vote in November 2024. This is something investors need to take seriously. Keen to avoid the disorganisation seen in his first term, Team Trump has been busy recruiting aides who can take hold of the agenda from the start. The focus is on areas where the White House has a freer hand to enact change, such as trade policy and regulation.

A key domain where Trump could have a “day-one” effect is climate. He has previously pledged to repeat the first-term US withdrawal from the Paris Agreement and signalled he would unwind the Biden administration’s Inflation Reduction Act (IRA), a significant decade-long programme of spending to support the green transition.

There is also a geopolitical angle. Trump-era foreign policy was erratic and transactional but benefited from a broadly peaceful and stable backdrop. Since then, the world has become more volatile due to the wars in Ukraine and Gaza, alongside China’s more assertive stance in East Asia.
To that end, Beijing is taking a strong interest in the outcome of Taiwan’s presidential election in January, as the ruling party candidate Lai Ching-te faces opponents more open to rebuilding relations with China.

If Lai were to win on a strong anti-China platform, that might motivate Beijing to act. Although it is unclear what such action would entail, it would no doubt be a source of uncertainty and potentially involve other major powers, notably the US. The US has given security guarantees to Taiwan; it would be alarming if those guarantees were to be tested.

Political risk is an ever present for global investors, but the range of possible outcomes appears wider next year. We are likely to see more volatility in popular safe havens, such as gold and the US dollar, around the time of key events.

2. The market expectation is for interest-rate cuts across major economies next year. The odds of a “soft landing” are much higher than they were six months ago and 2024 is likely to be a better year for bond returns

Market expectations are for five interest rate cuts in the US and euro zone in 2024, and three in the UK.

These expectations are based on two factors. Firstly, the consensus is that inflation in most regions will still be ahead of central bank targets, but much closer to those targets than today. Secondly, because interest rates have been rising for a while, this may have a braking effect on economic activity and central banks may need to cut rates to support growth.

It is reasonable to think we are at the peak for interest rates, but it is still sensible to be cautious about how quickly they might fall. Even forecasts that have inflation coming down still anticipate core inflation will be above headline inflation. If we get any shocks or volatility in commodity prices, key drivers of headline inflation, allied to above-target core inflation, we could potentially end up with positive inflation surprises. This is not our central case but in such a scenario, expected cuts in rates may not materialise. The risk may be underappreciated by markets.

Nevertheless, the slowing of inflation has increased the odds of a soft landing, which are now much higher than six months ago. The economic data varies between countries, however. Earlier this year, the US saw a slowdown in its housing market and is now seeing a moderation in the jobs market. Wages have slowed but are still strong relative to history. Overall, while tighter monetary policy is having an effect, the signs for growth are not alarming. The base case is that the rise in the unemployment rate will be less than one per cent (although it should be noted that it is difficult, when an economy starts to slow, to keep unemployment under control).

In the euro zone, slowing growth has been more evident in the industrial manufacturing sectors, perhaps connected to reduced demand from a sputtering Chinese economy and challenges in the construction and real estate sectors.

The outlook for inflation and interest rates should allow for a better period for government bonds in 2024

All things considered, the outlook for inflation and interest rates should allow for a better period for government bonds in 2024. The last three years have seen cumulative negative returns for bond markets, which has led investors to question their role in a diversified portfolio.

However, two important things have happened. Firstly, yields on bonds have risen, particularly on longer-dated bonds. Secondly, now that we are approaching the end of the tightening cycle, cash may not offer the high returns it does currently for much longer.

The ideal time for bonds is when there is a sharp drop-off in growth and challenges for risk assets. The combination of peaking interest rates and the extra yield on offer in bonds may attract investors looking to lock-in higher yields for a longer period, rather than be faced with reinvestment risk from holding cash.

3. AI could allow a broader range of companies to significantly improve productivity, supporting global equity markets

Revenues were a key concern for equity investors in 2023. The big unknown was the extent to which central bank tightening would affect people’s willingness to spend on companies’ goods and services.

The reality is that it was a decent year for global equities, underpinned by continued strength in corporate revenues. There were also concerns about costs, bearing in mind the strong rise in commodity and labour prices, but profit margins held up reasonably well. In the second half of the year, large companies even managed to expand those margins. However, the contribution to overall market returns from the biggest tech companies – whose revenues stand to benefit from the advent of generative AI – has been significant.

Looking ahead to next year, a soft landing, particularly when accompanied by lower borrowing costs, would be a favourable outcome for many companies. But AI is likely to remain a significant factor in market performance. This technology is not going away; the question is whether the gains will be spread beyond a clutch of leaders in Silicon Valley. If AI leads to better productivity among a wider range of companies, that could help profitability and boost equity markets across the board.

One trend across the world since the Global Financial Crisis has been a steady decline in productivity – which creates challenges for companies in terms of how they maintain profits.

In the medium-term, the rollout of AI, along with other major technological advances in areas like healthcare, could reinvigorate productivity and open up the potential for continued profit growth among companies, without necessarily being accompanied by a significant reacceleration of inflation. While this is likely to be a medium-term story, we may start seeing signs of these trends shaping the fortunes of individual stocks in 2024.

4. China’s growth might accelerate next year, but concerns around property and demographics remain

The failure of China to show a meaningful recovery in economic growth was one of the biggest surprises of 2023. In late 2022, there was a strong consensus among investors that China would see a significant resurgence in activity with its post-COVID reopening, after the government imposed stringent lockdowns throughout the pandemic. But the reality has been disappointing. Despite the People’s Bank of China stressing in November the country was still on course to hit its full-year GDP growth target of five per cent, many in the market had hoped for more.1

There are two main reasons for this. Firstly, state intervention in the corporate sector has led to big challenges in terms of foreign direct investment into China. The number of international companies looking to make physical investments into China has dropped quite steeply.

Secondly, China is struggling with ongoing problems in the heavily indebted property sector. We have not seen a meaningful recovery in sales activity and prices since the pandemic. This has financial implications for property developers, which rely heavily on forward sales of houses for liquidity, and local governments, which depend on land sales to boost revenues.

Beijing has introduced many small measures to support the property market, but they have not been effective. This has raised the question of whether China has now essentially put economic growth and prosperity onto the backburner in favour of other priorities, like national security and reducing financial leverage.

While we shouldn’t forget the lasting impact of China’s focus on non-economic objectives, we are probably approaching a stage where the pace of economic stimulus is likely to increase rather than decrease into the new year. We expect the authorities will put more capital to work to support growth and perhaps ease off on some of their concerns about financial leverage and speculation.

More stimulus and faster Chinese growth would support global demand in the short-to-medium term, particularly among emerging markets. However, longer-term challenges around the property sector and rapidly ageing demographics are not going away. We would expect to see them re-emerge as dominant themes after any early sugar-rush from stimulus measures.


  1. “China’s 2023 growth target within reach – central bank governor”, Reuters, November 8, 2023.


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By Baillie Gifford

Opportunities like this are rare. In recent years, companies in Scottish Mortgage have faced combined headwinds from slowing growth, reducing earnings estimates and multiple compression. As we move into 2024 and beyond, those headwinds are being replaced by tailwinds.

Growth at a company level remains strong. Profitability is improving well. And to supercharge this, companies in the trust are underpinned by strong structural drivers. We have long said that what matters in the long term for companies is not where interest rates or inflation is; it is deep underlying structural change that generates returns.

Lessons from the past

This quote is from our 2009 Annual Report when Scottish Mortgage had just suffered a c.40% drawdown:

“ We will only abandon our contentions and our stocks when their long run prospects have deteriorated rather than when the dreadful mood of the markets has hurt their immediate valuations.”

We also stated, “The survivors of this shock may be in dominant positions for years to come”. In the following five years, Scottish Mortgage delivered a nearly 200% return for shareholders, powered by companies such as Amazon, Illumina, Google and Tencent.

Being truly long-term matters

Going back to first principles, the purpose of Scottish Mortgage is to identify, own and support the world’s most exceptional growth companies.

We find companies that have sufficient opportunity to deliver outlier returns and we own them for long enough without interference so that the return accrues to our shareholders.

The key takeaway: our philosophy has not changed. We know our approach will never consistently be in favour. We should not deviate from it to avoid short-term headwinds.
If patient ownership of growth companies was easy, more people would be doing it. That is why Scottish Mortgage is different. And why now is exciting.

Structural forces powering change and opportunity

Today, the portfolio is poised for growth amidst digitalisation, the shift towards a post-hydrocarbon economy, AI, and healthcare advancements. These transformational forces are helping our companies generate impressive fundamental growth and give us optimism for the coming years. Here are just a few examples.

Digitalisation: A game-changer

We see digitalisation as a transformative force, especially in underbanked regions. MercardoLibre exemplifies this, dominating Latin America’s digital space with its online marketplace and financial services. Similarly, Pinduoduo’s direct-to-consumer model in China and Coupang’s digital retail in South Korea showcase the potential for growth unrecognized by markets.

Sustainable solutions

Our belief that sustainability also creates opportunity is evident in private company investments like Northvolt’s battery production, Climeworks’ carbon capture, and Solugen’s chemical industry decarbonisation. These companies address broader climate challenges beyond transportation, tapping into the growing demand for renewable energy and sustainable technologies.

AI: A new technology paradigm is born

AI will have a transformative impact, with OpenAI’s ChatGPT marking the start of a new technological paradigm. AI’s potential to enhance platform business models and physical world applications is significant. Roblox and Meta’s ability to leverage AI for content creation and targeted advertising underscores the importance of embracing growth opportunities in this field.

Healthcare: Innovations for better outcomes

Moderna’s success with mRNA technology in vaccines signals a higher likelihood of breakthroughs in various clinical programs, including cancer. AI’s role in diagnostics and healthcare, as seen with Tempus’s genome sequencing and treatment recommendations, points to a future of more effective medicines. Recursion’s drug discovery and 10x Genomics’ cell sequencing further illustrate the potential for significant advances.

Investing in exceptional companies for long-term impact

To conclude, Scottish Mortgage remains focused on a select group of exceptional companies that promise outsized impact over time. The optimism for the portfolio’s future is grounded in the convergence of powerful structural forces which are expected to drive continued growth and profitability over the coming decade.

By Mark Coles, Business Development Director – Head of National Accounts, Evelyn Partners

Artificial intelligence (AI) is much more than designer robots, promising to bring automation and digitisation – and significant disruption – to multiple industries. It could deliver solutions to some of the world’s largest problems, from climate change to worsening demographics, but others see a darker side as AI grows in sophistication.

Computing power

AI requires vast computer power to store and analyse data. Governments across the world are investing in supercomputers. The UK recently entered this supercomputer arms race, with the latest budget promising £1 billion to help develop an exascale supercomputer (1.), that will have 1,000 times more speed and power than today’s most advanced computers. However, it is playing catch-up – China already has 170 supercomputers (2.).

As well as its role in a range of industries, AI could stimulate economic growth. Research from Goldman Sachs finds that generative artificial intelligence, a form of AI which generates content from simple prompts, could drive a 7% (or almost $7 trillion) increase in global GDP over the next decade. It could also lift productivity growth by 1.5% over the same time frame, presenting a compelling solution to the weak productivity growth that has held back mature economies (3.) in recent years.

Nevertheless, there is a downside. The Goldman Sachs report highlights the potential negative impacts of AI on our livelihoods across the world. It estimates that shifts in workflows triggered by these advances could expose 300 million full-time jobs to automation – equating to almost 10% of the global labour force. Certain jobs – long-distance lorry drivers, claims processors, translators – could become obsolete. Economists from Goldman Sachs estimate that roughly two-thirds of US occupations are exposed to some degree of automation by AI (3.).

AI investment opportunities

As investors, we need to accommodate these positive and negative elements. We need to assess opportunities among the growing list of companies that will participate in the growth of AI, but also avoid those companies likely to be disrupted by it. We also need to be careful on valuation. Emerging areas often attract speculative investors and quickly become expensive, leading to poor risk-adjusted returns. Just because a phenomenon is global and has a transformative impact doesn’t necessarily make it a good investment.

Instead of trying to pick winners from the increasing number of unprofitable AI start-ups, we are investing in the more established technology names. Few companies have the scale of data management and processing required to handle the growing volumes of data that are crucial to the successful deployment of AI. These incumbent mega caps are, therefore, likely to maintain their dominant positions for the foreseeable future. They also have the cash to hoover up the winners in the start-up space, as well as the resources to invest in AI research and development. Our analysts are focusing on companies that have a proven track record of innovation and delivering shareholder value.

We find it can often be more rewarding to invest in the ‘picks and shovels’ rather than the gold rush. Here, that would be areas such as semiconductors or the hardware that is necessary for AI development. These companies are unlikely to see the same boom-bust dynamics as the companies at the coal face of AI.

Artificial Intelligence is changing the world and will continue to do so. It will play a crucial role in the technological revolution we expect to see over the next decade. We want to participate in the growth of companies with proven experience in deploying new technologies, while avoiding those that face an existential threat.

For further information please contact Mark Coles

This article is solely for professional advisers and does not constitute investment advice – not for use by or for distribution to retail investors. The value of investments can go down as well as up and investors may not get back the amount invested.  Issued by Evelyn Partners Investment Management Services Limited, authorised and regulated by the Financial Conduct Authority