Adviser-to-client template: 2024 Opportunities
For financial advisers to use with clients. This document is intended to support your service proposition to clients. It is produced by our investment writers with a deliberately light tone and structure. However, these are guidance paragraphs only. It is not guaranteed to meet the expectations of regulators or your internal compliance requirements. If you wish to remove or amend any wording, you are free to do so. However, please bear in mind that you are ultimately responsible for the accuracy and relevance of your communications to clients.
Dear Client,
As we settle into 2024, I wanted to proactively reach out to you by delving into key trends, potential opportunities and risk factors that are shaping your financial progress.
If you have any questions about the below, or require any financial planning assistance, please don’t hesitate to contact us and we’ll arrange a time to meet.
Key Trends
Investors will likely be happy as they review their statements in early 2024. Nearly all traditional asset classes have generated positive returns in recent memory, boosted by performance across equities and bonds. This obviously follows a tough year in 2022 for most investors, so we feel good about the market direction and what is ahead.
The strength has largely been driven by the expectation central banks will cut interest rates in 2024 as the worst of the inflation spike is now considered behind us. Several equity markets now sit at or near all-time highs. Bonds have had a harder time but have also seen a recent uptick prices as yields fell in Q4 2023. This is a feature, not a bug, of investing – we want different assets that can perform well at various stages of your journey.
Let’s not forget that investors went into 2023 worried about inflation and expecting a recession by the second half of the year. This never transpired. Now in 2024, investors are expecting low inflation, no recession, and significant interest rate cuts.
Potential Opportunities
At present, we remain cautiously optimistic. Our approach in this environment is to balance risk and opportunity, with some asset classes looking attractive to us at the current time.
To that end, we are informed by the views of Morningstar, among others, and see positives in this environment. Morningstar sees opportunities to add value in fixed income and select equity markets, which are expressed in your portfolio. A brief list of the convictions include:
- A broad allocation to equities, although parts of the US market are expensive by historical standards.
- A small allocation to emerging markets, despite the risks China equities look attractive.
- Government bonds where higher yields can provide diversification benefits again.
We feel good about your portfolio and its ability to capture the opportunities that exist. This is especially true given the potential interest rate cuts ahead, where we could find ourselves with a tailwind to our back.
Risk Factors
On the risk side, it is likely to be a busy year with elections in the US, UK, India, and others. Geopolitical tensions are also quite high, so we should expect bouts of uncertainty. In times like these, it is essential we remind investors that the presence of uncertainty does not imply a scarcity of opportunities.
As Warren Buffett famously said, “Risk comes from not knowing what you are doing”. In this respect, we want to emphasise the importance of focusing on good investing principles and dealing with the conditions we are faced with. We will continue to control everything we can, while managing those factors we cannot control via principles such as diversification.
Overall, we feel well placed to advance your financial journey over 2024 and believe your portfolio is well positioned for this environment. Markets have been reasonably kind to us lately and we continue to look ahead with positive intent.
Should you have any questions or require further clarification on any aspect of your financial plan, please do not hesitate to reach out.
Kind regards,
Adviser
Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg. Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.
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