Dynamic Landscape for Multi-Asset Income Seekers

In the first half of 2024, economic growth was solid and inflation rates remained sticky, leading capital markets to dial back expectations for policy rate cuts this year. Stock and bond markets, which had tracked closely in 2022 and 2023, began to diverge in 2024, with stocks rallying even with bond yields rising for a good portion of the first half.

Being too defensive in a multi-asset income strategy during 2024 might have cost investors some equity upside, even accounting for a particularly rough early August for markets. Some of the recent weakness may be technical, driven by elevated positioning. To the extent that this is true, it may point to a good entry point for investors—providing that the economy achieves a soft landing.

On the economic side, we’ve raised our gross domestic product forecast for this year, with the US forecast at 2.4%, just below last year’s growth and near the long-term trend. Europe is likely to accelerate modestly as recession fears recede. We expect inflation to continue cooling: US progress ebbed earlier in the year, but the last two releases have been softer than expected. Across several major economies, inflation is now running in the 2% to 3% range.

Lower inflation has opened the door for the Federal Reserve to start cutting rates, joining other central banks including the Bank of Canada and the European Central Bank. A soft-landing, lower-inflation scenario seems favorable for risk assets, including equities. And with bond yields still relatively high, fixed-income offers strong income and return potential. It’s a landscape that’s compelling for multi-asset income strategies—particularly those with the flexibility to shift across and within asset classes.