This year appears to be a rare phenomenon from an investment perspective. We have the confluence of several factors playing out in tandem, and economists and analysts are left pondering over the impact and likely outcomes on investments, including stock prices, commodity prices, fixed income products, and the security of many people’s nest eggs. What has caused this surge in anxiety? What could be the reason(s) for this uncertainty?

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Reason 1:

Likely Recessionary Trends across 20 countries and counting: The image shared by OECD reflects a picture of a possible recession across several nations, including Japan, the UK, Germany, and many more. Luckily, the US economy is not part of that list at the moment, which augurs well for the global economy for the most part. It would have been a serious catastrophe if the US had slowed into a recession, as many had forecasted a few months ago. Across the oceans, the Asian giants – India & China – appear to be continuing on their growth path, with India retaining the tag for the fastest-growing economy in 2024-25. However, many other Asian economies dependent on exports, such as Vietnam and Malaysia, are tottering as well. Closer home, India’s neighbors are in very bad economic shape as well, offering limited options to invest.

Reason 2:

The Super ELECTION YEAR: This is a rare occurrence. Over 2 billion people across the globe are to be voting in choosing their leaders. Investment markets – be it equity, commodity, or any other – generally detest elections due to the uncertainty they throw up, and markets are supposedly uncertainty-averse. With such an extensive election rigmarole being played out across the globe, markets are likely to remain volatile. While certain leaders are likely to return, rendering stability to policies and programs, upheavals in several others can upset the investment applecart, rendering returns on investment uncertain. While across India, the ground feel appears to point to a return of the present incumbent, the US paints a contrasting picture, and this could alter the ROI outcomes this year.

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Reason 3:

Escalation in Geo-political & Terror acts: We have two known battles on – The first one between Russia & Ukraine (second year) and the second one in Israel. These apart, we also have the Houthi rebels unleashing their form of terror against tankers and ships sailing the Red Sea, setting a chain of fear and trade disruption. Wars are investment-unfriendly acts and impact how money is deployed. Wars also impact global trade and commerce and create price volatility across the commodity market. Given such scenarios, investment managers are likely to move money into economies that are less impacted by such acts and can offer growth potential despite these occurrences.

Reason 4:

Interest Rates: Reserve banks across the globe were more or less unified in their actions to raise rates across the past eighteen months, citing inflationary pressures. Retaining high rates for sustained periods can hinder economic activity, and the global economy is at that juncture. Sooner than later, these rates are likely to be cut. Most central bankers await the first act to be played out in the US, and they would follow suit. This is also because they wish to retain the interest rate differentials between their currency and the USD. High-interest rates are generally considered equity market-unfriendly but are gold-friendly! Not surprising that the price continues to hold above $2,000/oz.

Into the above potpourri add in the final element – a dash of human expectation, and you have the perfect blend of uncertainty. India remains attractive as an investment destination, the US is critically poised, Europe is tottering, and Japan, despite being in a recession, has registered its highest level on the Nikkei (the National Stock Index) since 1989. Are stock indices reflective of the economic reality prevailing there? Are they anywhere? That’s the power of expectation. The blend this year is likely to get heady and make you tipsy. If you think you’ve tasted it all, try INV 2024!

 The last man standing wins!! 

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