Where to invest: 2024 !

Happy New Year!

As we enter 2024, I thought it expedient to provide some views to help navigate the investment landscape.

From a global perspective, while world economic growth is expected to remain fragile (IMF Forecast: 2.9%), we see global inflation cooling off which would lead many central banks to begin easing monetary policy – global interest rates are expected to fall in 2024. Potential risks include escalation of geopolitical tensions (particularly between Israel and Hamas) which could disrupt energy markets and worsen the inflation picture.

Back home, while the 2024 economic environment remains challenging, we see some improvement from 2023. Estimates for domestic economic growth by various institutions average 3% (2023E: 2.9%) driven by recovery in oil production with scope for domestic refining serving as a potential catalyst. We see disinflationary trends in 2024 driven largely by base effects and improving output but expect the headline figure to remain high (Average 2024 inflation: 20% vs 25% in 2023). On the back of moves by the government to stem the pressure on the currency with up to $10 billion borrowings ($2.25 billion Afrexim loan reportedly in), we expect USD supply to improve over 2023 levels to anchor the official NAFEM rate between NGN/USD 800-900 and narrow the parallel market gap. Due to still high inflation and currency challenges, we expect the CBN to maintain a tight monetary policy stance, at least in the first half of the year before easing in the final quarter.

Where to invest?

I believe 2024 calls for a Total Portfolio Approach to investing – diversifying across various asset classes and assessing risk-reward to navigate what will sometimes seem a volatile financial market. These are my thoughts:

Fixed Income: With tight monetary policy and outsized Naira borrowings from the government to plug the budget deficit, I expect interest rates, particularly the long end of the yield curve, to remain high over the first half of 2024. We are in a “golden yield” cycle and may not expect these interest rate levels to last long. Thus, the strategy here is to “go long” and lock-in high interest rates for longer.

The Norrenberger Turbo Fixed Income Fund is positioned to optimize this strategy. At the same time, for investors with a shorter time frame, the Norrenberger Money Market Fund and The Norrenberger Classic Investment products can provide near-term competitive yields.

USD Exposure: Amidst still high inflation and currency challenges, protecting your portfolio with USD exposure is a must for every investor in 2024. The Norrenberger Dollar Fund and The Norrenberger Classic FX Products are your “go-to” options for USD exposure. Recall, our expectation is for global USD interest rates to decline – thus, a long strategy on USD interest rates is the smart option. Our Dollar fund has locked-in double-digit yields on mid to long tenor investment grade dollar bonds and can provide investors competitive yields for longer. I must also mention that it is one of the highest-yielding in its category.

Equities: Look away if you didn’t buy stocks in 2023. Nigerian stocks had a stellar 2023 with the broad market index (NGX ASI) returning 46% for the year driven by the post-election euphoria and attempts at fuel subsidy and currency reforms. Some stocks such as TRANSCORP HOTELS (+1,023%), MRSOIL (+645%), and NNFM (+635%) significantly outperformed. Another way to look at this is, if you invested N10,000 in TRANSCORP HOTELS at the start of the year, you would have cashed out with N102,300!

While we do not expect a repeat of such strong performance in stocks for 2024, we still believe the market will throw up selected opportunities – top tier Banks, Telcos, and Agri producers are our preferred sectors. Our strategy here is to position early 2024 for earnings season and dividend declarations in the first quarter of the year, then underweight equities in Q2 and Q3 and re-enter for a potential Q4 rally which is expected to coincide with a reduction in interest rates.

In partnership with our stockbroking company, Norrenberger Securities Limited, we are launching the Norrenberger Model Equity Portfolio this January which will serve as a guide to stock market exposure.

Alternative Investments: Alternative assets provide a hedge against inflation as well as a performance kicker to investment portfolios. Under alternatives, we think some form of measured exposure (due to the high-risk nature) is warranted to further diversify investment portfolios and boost returns. Asset classes to consider here range from real estate to commodities and other specialized funds.

Along with the Norrenberger Classic products, we have other structured products that can give exposure to alternative assets.

Would you like to discuss the Total Portfolio Approach to your investments? Reach out to your relationship manager and we will schedule an appointment.

At Norrenberger, we remain committed to providing the best investment options to enable you to build wealth.

I wish you a profitable 2024!?

Pabina Yinkere

Business Head, Asset Management