A banker told me this week that when he meets corporate borrowers and investment clients to discuss what lies ahead in 2024, they always ask him the same question: What are the three big risks? And he always gives them the same answer. One: rates. Two: rates. And three: something horrible that we haven’t thought of yet.
Bearing in mind that item three is inherently impossible to predict or hedge against, this rather crude but also alarmingly accurate assessment means we find ourselves stuck in the world of one trade.
However tempting it is to join the crowd who believe that corporate earnings or economic fundamentals will reassert themselves as predominant investment themes now that the zero interest rate era is over, US monetary policy and its related impact on bonds remains the most obvious factor for any investor’s performance.