Central banks rate cuts and their impact on investors amid shift

There is a likely shift in global monetary policy, signalling the beginning of significant interest rate cuts by major central banks, a new report from Standard Chartered indicates.

This move marks a key turning point for investors as policymakers pivot their focus toward supporting growth.

The report, titled Global Market Outlook for the Second Half (H2) of 2024, outlines the potential benefits of these interest rate cuts. By lowering borrowing costs, central banks aim to create a more accommodating environment for private-sector credit, encourage increased borrowing and investment, and ultimately stimulate economic growth.

Manpreet Gill, Standard Chartered’s Chief Investment Officer, emphasized the need to adapt investment strategies in align with these shifting economic winds.

Better opportunities

In the report, he advises investors to prioritize stocks—especially those from the United States and India—over bonds and cash. According to Gill, equities offer better opportunities for growth by allowing investors to share in company ownership, earnings, and assets.

Gill also recommends diversifying portfolios with gold and emerging market bonds, particularly U.S. dollar-denominated bonds. These assets serve as diversifiers, helping investors mitigate risk and enhance portfolio resilience.

“Staying invested for the long term, adapting to trend shifts, and keeping a watch for opportunistic ideas to add to a diversified portfolio is our fundamental investment approach, which also supports our latest outlook report,” Gill emphasized.

The report outlines strategies for navigating the evolving global markets and suggests that investors must reposition their portfolios to optimize returns and meet long-term financial goals in response to changing policy dynamics. “Balanced portfolio allocations containing stocks, bonds, and alternative assets are likely to outperform those solely aimed at generating income,” Gill explained. He highlighted the bank’s success with a balanced allocation strategy, which has risen by 6.7 per cent since the beginning of the year, outperforming income-oriented strategies that saw a modest 0.5 per cent increase.

Standard Chartered assures its clients that they are committed to understanding individual goals and risk tolerances. By tailoring investment strategies to meet specific needs, the bank aims to help clients capitalize on the benefits of a well-diversified, long-term portfolio foundation that provides sufficient protection and growth potential.

As global central banks embark on this new era of interest rate cuts, investors are presented with opportunities and challenges. By adapting to these changes and embracing a diversified, strategic approach, they can position them to thrive in the dynamic financial landscape of 2024 and beyond.