Good morning.
There’s about six weeks left in 2023, and a top analyst thinks we may need to brace ourselves for trouble ahead in the markets and economy going into next year.
Jim Masturzo is chief investment officer at Research Affiliates (RA), a firm that oversees strategies for over $130 billion in mutual funds and ETFs for the likes of Pimco and Charles Schwab. “For this writer, RA provides superb, academically-based insights into both where the economy is headed, and how investors should best position themselves to profit from the looming trends,” writes my finance colleague Shawn Tully.
“2024 economy and stock market predictions: Expect subpar returns in a new ‘age of austerity,’ says a top analyst at Research Affiliates,” is Tully’s new piece that delves into Masturzo’s predictions.
“Masturzo concedes that in the short term, ‘The economy could remain buoyant and investors resilient,’” Tully writes. “But he believes that the big federal spending and ‘free money’ Fed policy that funded the bash will soon leave a stiff hangover. ‘The macro game of musical chairs cannot go on forever,’ Masturzo writes. It was the regional banking crisis starting in March, he says, that exposed the first cracks.”
“But after a steep selloff, frenzied excitement over the future of AI sent Big Tech soaring once again. Now, Masturzo believes the economy and the markets stand near an historic inflection point." He thinks the "exhaustion of the COVID money, the end of student loan forbearance, and the stubbornly rising prices bound to spook consumers will ‘pave the way for an eventual recession,’ and usher in years of austerity,” Tully writes.
Well, that does sound bleak. But not all hope is lost. Investing will require a new paradigm, according to Masturzo. "The best investment categories of the last decade may prove the worst performers going forward, meanwhile the beaten-down, unloved sectors of recent years are likely to thrive," Tully explains.
You can read more about the new paradigm here.
Sheryl Estrada
sheryl.estrada@fortune.com
