2024 Investment idea: Quality/growth

Portfolio consultants Mark Cintolo and Sean Kaukas apply the Investment Committee’s Cyclicality vs. Inflation framework to equity allocations for 2024.

• Much of the volatility over the past few years can really be boiled down to the market repricing inflation and growth, so we built a framework to help clients align their portfolios with their outlook on both of these factors.
• In 2023 we’ve seen an environment where inflation has eased dramatically, falling from levels that we hadn't seen in decades – and now it’s within striking distance of the Federal Reserve's 2% target.
• Meanwhile, economic growth has proven much more resilient than many initially expected.
• Looking ahead, we expect inflation and the labor market to continue normalizing, but we appreciate the potential for a slowing growth environment.
• Based on our historical framework, we’ve seen the quality factor outperform in slowing growth environments, along with growth strategies – particularly US large cap growth.
• We also see two scenarios that would warrant a cut in interest rates by the Fed next year – and it’s important to understand both of them when making portfolio allocations.