That’s according to a new study from Natixis Investment Managers, recently cited in BenefitsPro. The study included responses from 500 institutional investors, who collectively manage $23.3 trillion in retirement and other institutional assets. The purpose of the survey was to determine what is keeping investors up at night heading into 2024.
About half of those surveyed said they believe a recession is inevitable in the coming year; three quarters of that group said a recession would be painful or very painful. Among those who anticipate a recession, 39% expected a downturn in the first half of the year, while 42% predicted recession in the second half.
Additionally, two-thirds of institutional investors said market uncertainty will prevail in 2024. About 54% were bearish on stocks, while 46% were bullish. Economic uncertainty played a key role in investors’ market outlook for the year ahead. Almost six on 10 (59%) anticipate volatility in equity markets, while 39% expect a similar trend for bonds.
Inflation and interest rate projections also demonstrated worries about the economic climate in the coming year. Among those surveyed, 40% predicted inflationary conditions would remain at current elevated levels, while 40% anticipate further reductions in 2024. Moreover, 60% of institutional investors agree that higher inflation is here to stay. Interest rates are the biggest risk factor to portfolios this year, according to 62% of those surveyed.
Many institutional investors also reported geopolitical risk as a primary economic threat to investors in 2024. Respondents pointed to rising prices for energy and food related to Russia’s invasion of Ukraine and worries about China’s political ambitions and their impact on the world stage. Additionally, the 2024 U.S. elections and skepticism regarding the results could also negatively impact markets, according to the institutional investors that responded to the Natixis survey.
The economy and markets are potentially in for some challenging times in 2024. Retirement plan sponsors and advisors would do well to remain diligent and pay attention to breaking developments while reminding individual investors that saving for retirement is a long-term strategy, and therefore, staying the course amid market volatility and economic uncertainty may be the best course of action depending on their anticipated retirement date and goals.
