Investing in an Interconnected World: Cross-industry Linkages
Capturing companies’ relationships and interconnections across industries during the investment process can help identify new opportunities and limit risks.
Jun 11, 2024
As of early 2024, a U.S. recession doesn’t appear to be in sight, with economic and market resilience pointing to a lower probability of a significant left-tail outcome. Read on to hear the multi-asset team’s forecast for the quarter ahead.
The global economy remains resilient even as major central banks maintain elevated policy rates to bring inflation back toward their targets. Global GDP growth is expected to moderate slightly in 2024 to 2.8%, down from 3.1% in 2023. Despite the healthy growth environment, inflation appears to be tracking toward central bank targets although the last mile is proving to be a bit stickier than initially expected.
For Q2 2024, PGIM Quantitative Solutions’ Multi-Asset team’s annualised nominal 10-year return forecast for Global Equities is 7.0%, a slight decrease from the first-quarter forecast of 7.1%. Global sovereign interest rates moved broadly higher in the first quarter as expectations for global central bank rate cuts were pushed further out into 2024 amid a resilient global economy and still stubbornly high inflation.
The long-run forecast for hedged Global Aggregate Bonds is 4.0%, a small increase from last quarter’s forecast. The team’s forecast return for a balanced portfolio of 60% Global Equities unhedged and 40% Global Aggregate Bonds hedged is 6.2% annually over the next 10 years, which is identical to the forecast at the end of the first quarter of 2024.
Capturing companies’ relationships and interconnections across industries during the investment process can help identify new opportunities and limit risks.
Portable alpha overlays can potentially provide a flexible and scalable means for asset owners to enhance the expected returns of their allocations.
PGIM Quantitative Solutions examines cross-asset relationships that may help make better asset allocation decisions.
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