Executive summary 2024 extended on the impressive returns of 2023 and then some. At the end of last year, markets were predicting six to seven Fed rate cuts with much contention around a soft landing, hard landing or no landing. Had investors been overly cautious and avoided risk assets they would have missed the stellar equity markets.
US equities have led the charge, driven by renewed optimism about the US economy’s resilience. More recently there is a renewed optimism, particularly in small companies, following Trump’s sweeping victory and his administration's pro-business agenda which benefits US mid and small-cap companies.
Looking ahead, VanEck’s latest portfolio compass dissects our observations on inflation, policy rates, economic growth and exogenous risks.
While the US appears fully priced, we think there are opportunities in equities at the sector, regional, market capitalisation and stock levels. The stars are potentially aligning for global small caps to outperform large caps due to attractive valuations and the prospect of the global economy avoiding a recession. Global REITs and infrastructure could also do well due to their relative valuations, coupled with the potential for long-term interest rates to decline through 2025.
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