Amid ongoing market turbulence and shifting global economic prospects, we are likely to see a promising trajectory for global equity portfolio returns in 2024. This will be buoyed particularly by shares in the global healthcare and technology sectors, which are poised to drive global equity portfolio returns over the period. This comes as financial markets have responded positively to anticipated shifts in inflation and interest rates, coupled with the latest robust US employment data.
Pharmaceuticals, biotechnology and AI drivers
The healthcare sector, particularly the biopharma sub-sector, has seen budget cuts post-COVID19 due to the decline in pandemic related sales. However, we remain confident that the sector is experiencing a resurgence in investor confidence thanks to the digital revolution.
Pharmaceuticals and biotechnology, with substantial R&D budgets, are expected to be significant drivers of growth in the sector. Investors who strategically position themselves in certain companies are poised for a good year. In addition, healthcare businesses with high barriers to entry and sustainable competitive advantages, such as Novo Nordisk and Eli Lilly, are positioned to thrive, particularly in areas such diabetes and obesity medication.
We also anticipate some continuation of the stellar performance seen in 2023 by the global technology sectors, including the renowned ‘Magnificent Seven’, particularly Meta and Alphabet.
An edge amid interest rate uncertainty
Currently, however, market volatility continues to persist due to uncertainty regarding anticipated interest rate cuts.
Nonetheless, regardless of whether the Fed begins cutting rates before the end of the year or only in 2025, Shariah compliant investing offers an attractive alternative for all investors due to its overall indifference to interest rates, given that it does not invest in credit based instruments. This unique feature enhances attractiveness as a compelling investment option, especially in times like these when interest rates significantly influence market dynamics.
Contrary to common belief, Shariah compliant portfolios are not only limited to faith conscious investors. One would find that approximately one in five investors in an asset manager’s Shariah compliant retail portfolios are non-Muslim.
This highlights the offering’s broad appeal as a diversified investment option that addresses ethical, faith-based and environmental, social and governance (ESG) considerations.
These types of portfolios have had their position reinforced by recent market trends, where risk assets have rebounded following adjustments to US Federal Reserve policy. However, at this volatile time investors must be cognisant that the market could turn at any time; and therefore should take care to build an overall personal investment portfolio that can take market shocks should they arise.
For investors seeking ethical and diversified exposure to global equity markets, Shariah portfolios offer investors a compelling opportunity for superior investment returns.