BNP Paribas Wealth Management Shares Key Investment Themes and Outlook for 2024

In 2024, a few select trends could guide investors’ portfolio allocation, according to an update shared by BNP Paribas (EPA: BNP).

First, the impact of higher interest rates that has “not yet been fully reflected in growth and some shortages of commodities and consumer goods that could continue.”

In addition, governments will need “to commit considerable resources to reduce reliance on fossil fuels and transform the economy in order to meet climate goals.”

Finally, rising life expectancy and changing consumption patterns “should also create real opportunities.”

Edmund Shing, Global Chief Investment Officer, BNP Paribas Wealth Management, said:

“2023 was a year when we finally saw inflation rates fall from historic highs. Stock markets managed to advance on the back of a surprisingly resilient global economy, in the face of short-and long-term interest rates rising to multi-decade highs. Even though interest rates will continue to have lagged knock-on effects across the economy, investors can now take advantage of attractive risk-free rates of return not seen since the 2008 financial crisis. Moreover, the will to reduce our reliance on fossil fuels and the permanent evolutions in lifestyles after the pandemic are creating new investment opportunities in the Healthcare and Energy sectors.”

Investment Themes for 2024, according to BNP Paribas:

Theme 1 – Reaping real returns

Since the end of 2021, the interest rate world “has undergone a seismic shift. What was judged safe up until 2022 may not be so secure in future, given rising debt costs, and thus concerns over long-term debt sustainability. Positioning to profit from real bond yields (excluding inflation) that are the highest since at least 2011 is an attractive choice for conservative investors, in order to lock in a generous inflation-protected level of income for the next few years.”

The firm says it is seeing investment opportunities in:

  • Sovereign bonds: US Treasury Inflation-Protected bonds, US sovereign bond funds and ETFs.
  • Corporate bonds: US and euro investment-grade credit.
  • Infrastructure: diversified infrastructure funds with growing yields, energy infrastructure funds and ETFs.
  • Structured products: high income solutions based on corporate credit

Theme 2 – Winners in a multipolar world

Today, we observe a shift away “from globalisation which will potentially trigger shortages of raw materials and goods.”

This shift is also powering near-shoring and “re-shoring of manufacturing production in order to reinforce supply chains, especially of key strategic industries such as semiconductors. Security of strategic resources is the new imperative.”

This environment is allowing enhanced opportunities for investing in:

  • Productivity-improving products and services as companies seek the greater use of technology to enhance automatisation
  • Robotics and automation in new product facilities
  • “Middle power” countries (India, Brazil, Mexico, Indonesia and Australia).
  • Technology security: cybersecurity, semiconductors, satellite technology and networks
  • Food security and water efficiency – irrigation and clean water production, agri tech and new fertilisers

Theme 3 – Decarbonisation and Electrification

Energy transition momentum continues “to accelerate, propelled by a 2023 summer that was the hottest since records began in 1880.”

The key to energy transition “is electrification – allowing us to gradually move away from a dependence on fossil fuels. Government subsidies and regulation continue to play an important role in incentivising the heavy necessary upfront investment in electric infrastructure including power generation, transmission, and storage. Energy efficiency is also a key focus in this transition effort, as it remains far cheaper to economise energy than to produce it.”

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