Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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What happened to the future?
Steen Jakobsen
Chief Investment Officer
The once bright future now appears more bleak than ever. Geopolitical conflicts are increasing without resolution. Despite a widespread desire for political change, which is evident in the rise of far-left and far-right parties, outcomes remain disappointingly similar. This is because most political agendas offer nothing more than repeated and watered-down versions of past proposals for change. Even cultural life is dominated by repeats and reruns. Productivity in industry, culture, and politics has all but disappeared.
Instead of the promised flying cars, we have their less impressive cousin, electric vehicles. While we should be investing time in figuring out how to reach Mars, we spend it on social media, losing our ability to think critically while turning everyone into Kardashians. We’re engaged in meaningless nonsense in a world desperately in need of solutions for clean water, flooding protection, climate change, inequality, defence, cybersecurity, education, and infrastructure.
The game of pretending and extending is in its final innings. However, we expect 2024 to start and end on the same note. Growing discontent with the establishment will carry over into elections in the EU, UK, and possibly the US. The cynical may argue that perhaps this is the future we deserve.
The voices of desperation and discontent need a political platform to show that solutions are not found in anti-immigration measures, closed borders, abandoning international cooperation, a purely national security focus, or succumbing to panic and fear. All these measures are driven by fear, the most primal instinct in us all. To be compassionate, we must make an effort to rise above simplicity and egoism and embrace other people. The smartest person in any room is probably the most compassionate, not the most aggressive.
Our outlook will focus on how the world once again engages in pretending and extending, in this final innings. Whether it lasts for one or two years is unknown, but governments will infuse the system with fiscal spending, and the debt burden will become an issue once again. Political elections will be driven by fear and anti-establishment retoric, and it is more likely than not, that slow growth and relatively high core inflation will be the economic output. Q1 and Q2 pose the biggest risks to the economic outlook, while Q3 and Q4 come with increased political risk.
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