Santander Wealth Management & Insurance, which holds the firm’s private banking, asset management, and insurance businesses, believes that investors should consider strategies beyond the short term in 2024 following increases to interest rates

This strategy was stated in Santander’s Market Outlook 2024, Extending the Investment Horizon.

What are the opportunities according to Santander in 2024?

In addition, Santander shows a number of options that may represent attractive opportunities in 2024. These include increasing duration in sovereign bonds and stepping up exposure to investment grade corporate bonds.

Furthermore, Santander believes that 2024 is the perfect time to build a diversified portfolio thanks to the high yields in both rate-sensitive assets (government bonds) and cyclically sensitive assets (corporate bonds and equities).

Victor Matarranz, global head of Santander Wealth Management & Insurance, said: “Though economists love to produce very “mathematical” rules for the performance of macroeconomic variables, the fact is that the post-pandemic economy is departing from patterns observed in the past. In particular, the fastest interest rate increase in decades is only slowly moderating growth and inflation, raising doubts about the current macro dynamic.

“Sir John Templeton said that “the four most dangerous words in investing are ‘this time it’s different.'” So, to avoid that error, we’ll say that “this time it’s taking longer.” On that basis, our central scenario for 2024 is for economic growth to slow down (while avoiding a major global recession); inflation to ease (but remain high) and interest rates to start falling (gradually).

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“What to do in this environment? The lack of visibility so far on the end of the interest rate hiking cycle, coupled with a new episode of geopolitical risk in the Middle East, has led investors to focus on short-term investment solutions, as these have been the main beneficiaries of the increase in interest rates.

“However, we believe it is necessary to combine this approach with strategies that enable us to extend these returns over a longer period.”

For more sophisticated investors, Santander Wealth Management & Insurance points towards private markets, which are outperforming and can be accessed through a growing range of alternative investment solutions such as private equity, infrastructure, private debt, and venture capital.

Matarranz continued: “Outside government bonds and money markets, there are other assets with moderate credit risk and trading at reasonable valuations that represent attractive investment opportunities, such as investment grade corporate bonds. This makes it possible to construct balanced investment portfolios with a better risk-return profile than in recent years.”