Outlook 2024: Mike Gitlin (Capital Group)

December 28, 2023

By Mike Gitlin, President & CEO of Capital Group

Which asset classes are most attractive?

‘Where are we now as we head into 2024? I believe we’re on the cusp of a major transition, one where long-term investors can find attractive income opportunities as central banks pivot from restrictive monetary policy to something that looks much more benign.

Turbulent markets in 2022, plus the prospect of relatively high yields in money markets, led investors to flock to cashlike alternatives. Cash investments still look compelling to many investors today, but the Fed appears to be nearing a turning point. History teaches us that this may be an opportune time to shift back to stocks and bonds. If you agree that the Fed is nearly finished hiking and that cash yields may decline over time, the question is: where to invest now? After the Fed’s final hike in the last four cycles, equity and fixed income returns were both strong in the year that followed. Importantly, for long-term investors, these sectors maintained relative strength over a five-year period.

Inertia can be a very powerful force, especially 5% cash yield-induced inertia. Investor emotions are real. Past losses sting for a long time, and today’s seemingly attractive rates on money markets feel good. But as investors, we know that markets don’t idle for long. Investors could become stuck in cash if they wait too long to get back into the market, as better potential opportunities emerge. We focus on helping investors achieve long-term success. I firmly believe that the best path toward that goal is through stock and bond markets.’

Investors could become stuck in cash if they wait too long to get back.