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1、1EMBRACING CHANGEOUTLOOK 2024Washington Policy and Political Outlook16CIO Office Contacts36AI Revolution:Transforming Industries and Investments28Index Descriptions37Geopolitical Risk Dashboard:A New World20A Letter From Our Chief Investment Officer32023 Year in Review5A Brief Summary:Our Outlook Re
2、port4Outlook 2024:Embracing Change7Allocation Insights12Investors Handbook for Election Years24Where to Find Stifel Guidance35Disclosures38TABLE OF CONTENTSStifels Approach to Asset Allocation34How We Invest:Our Investment Management Process31 3|2022 OUTLOOK 2024 OUTLOOK 3My team and I are very plea
3、sed to share our 2024 Outlook:Embracing Change.As has been our practice for the last few years,we find it helpful to review how our outlook themes each year have unfolded and how they relate to one another.Published before a new coronavirus emerged,our 2020 outlook centered on geopolitics with the t
4、heme“Decade of Productive Competition.”But the coronavirus pandemic caused us to refocus,and in our 2021 outlook we offered“Reflections and a Way Forward,”with a focus on reopening and moving life back toward normal.For 2022 we identified“Balancing Acts”related to the challenges of reopening,like su
5、pply chain disruption,inflation,and geopolitical shifts being more permanent than first thought.Many issues remained unresolved as we entered last year,so our 2023 outlook centered on“Finding Balance”as we watched for cooler inflation,a less hawkish Federal Reserve(Fed),and equity market recovery.We
6、 analyze what happened last year in our article 2023 Year in Review.With all of this in mind,our outlook for 2024,“Embracing Change,”draws out the importance of accepting,and looking for opportunity in,how our world is rapidly changing.For example,AI Revolution:Transforming Industries and Investment
7、s shares how artificial intelligence will be used by individuals and companies today and into the future,changing lives and the way we do business.We revisit our focus on geopolitics with A New World an update to our Geopolitical Risk Dashboard and discuss how increasing protectionism is leading to
8、policies aimed at safeguarding domestic industries.We begin 2024 with tensions high in D.C.,as Congress must first focus on two budget deadlines and a renewed risk of a government shutdown.And soon attention on the U.S.elections will build,with the presidency,the House of Representatives,and 34 Sena
9、te seats up for grabs.An Investors Handbook for Election Years and Washington Policy and Political Outlook are provided to help us navigate the changes in D.C.We also share again these other insights for 2024:An overview:Our Investment Management Process;An important foundation:Stifels Approach to A
10、sset Allocation;and Where to find our work:Stifel Guidance.Finally,we share our 2024 Outlook,again providing our views for three possible scenarios for the coming year.Our base case is a bit more muted than in years past,informed by our view that the world is being transformed,with tailwinds like ar
11、tificial intelligence and headwinds like the need for Fiscal Transition across our economy,given increased levels of debt and higher interest rates.We also comment on more positive and negative scenarios,and we include our guidance on portfolio positioning and dynamic leanings.We hope you find our 2
12、024 Outlook informative and helpful.As always,we welcome your thoughts,observations,and comments.Michael P.OKeeffe,CFA|Chief Investment OfficerA LETTER FROM OUR CHIEF INVESTMENT OFFICER 4|2022 OUTLOOK 2024 OUTLOOK 42024 OUTLOOK 4 In 2023,the U.S.economy exceeded expectations,the S&P 500 gained 26.3%
13、,and elevated bond yields marked the beginning of a Fiscal Transition.Entering 2024,we observe several enduring changes in the post-pandemic world that may well require a recalibration of market expectations.Long-term investors should benefit from confronting andassessing these changes,maintaining c
14、omposure,and actively seeking ways to embrace the evolving landscape.We expect core Personal Consumption Expenditure(PCE)inflation to fall to 2.00%-2.25%by the end of 2024 and the Fed to potentially ease monetary policy with two or three 25-basis-point cuts in the second half of the year.Our base ca
15、se outlook calls for a soft landing,but we acknowledge a reasonable chance of a mild recession.The consumer,who of late may well be“spending beyond their means,”will be an important factor.Were anticipating positive calendar year returns for stocks(6.3%),but with increased volatility and market weak
16、ness at some points throughout the year.We believe consensus forecasts for earnings growth are too optimistic.We believe we are in a new interest rate regime and expect interest rates to remain well above their pre-COVID levels in this new business cycle.We expect the 10-year Treasury to be less vol
17、atile in 2024 and remain range-bound between 3.75%-4.25%for much of the year.Congress must confront several pressing items in January,including averting a government shutdown,addressing the debt ceiling,and passing a foreign aid supplemental package.The economy will be a key factor in the presidenti
18、al election.Historically,a recession within two years of the election spells trouble for the incumbent,while sitting presidents during an expansion in those two years are typically reelected.Rising geopolitical risks continue to influence the globaleconomy and financial markets,and the world is grow
19、ing more divided.Our Geopolitical Risk Dashboard includes a new theme,Financial Instability,which contemplates how the significant buildup of debt since the Great Recession and higher rates could spell trouble for consumers,corporations,and governments.Artificial intelligence(AI)is emerging as the n
20、ext transformative force with the potential to transform the labor market,increase productivity,and spur innovation.We remain focused on quality.In equities,we have a preference for companies that have strong balance sheets,considerable pricing power,and the ability to grow dividends.Within fixed in
21、come,the investment-grade bond market offers attractive yields and valuations.A BRIEF SUMMARY:OUR OUTLOOK REPORT2024 OUTLOOK 5MACROECONOMIC OVERVIEWSoft landing hopes revived.The U.S.economy defied expectations for a slowdown,prompting the Fed and economists to drop their forecasts for a recession a
22、nd reigniting investor hopes for a soft landing.Consumer spending was the main driver,supported in part by a still tight labor market and rising real wages.The unemployment rate averaged 3.6%throughout 2023,while real average hourly earnings grew 0.8%through November.The job market showed signs of l
23、oosening as the year progressed,with the number of job openings falling and jobless claims rising.The economy is estimated to have expanded 2.4%,meaningfully above the 0.3%consensus forecast at the start of the year.Inflation eases,but challenges persist.The Feds aggressive tightening of monetary po
24、licy and easing supply chain pressures resulted in a gradual easing of inflation.The consumer price index(CPI)fell from its peak of 9.1%year over year in June 2022 to 3.1%in November,still above the Feds stated goal of 2%per year.Core services,which include housing,remained elevated,keeping the CPI
25、above the Feds target.Real-time housing inflation measures,like the Zillow Rent Index,fell to pre-pandemic levels,suggesting the CPI component should eventually catch up.Higher for longer,we mean it.Investors and the Fed remained in an ongoing wrestling match,grappling with the timeline for rate cut
26、s.Contrary to consensus expectations,the Fed raised the federal funds rate 100 basis points to a target range of 5.25%5.50%.Chair Jerome Powell stuck to the“higher for longer”message to prevent the entrenchment of inflation expectations and to keep the market from preemptively pricing in cuts.The De
27、cember Fed meeting marked a turning point with Fed officials shifting the debate from how high to raise the policy rate to when to begin easing policy.2023We anchored our 2023 outlook on us Finding Balance on the paths for inflation,monetary policy,and the economy,which we anticipated would initiate
28、 a new bull market and cycle of economic growth.We identified eight“signposts”for finding balance,many of which were met,including the labor market moving closer to equilibrium,consumer confidence troughing,and company earnings holding up.Throughout the year,however,new risks and uncertainties emerg
29、ed.Five U.S.banks failed,Treasury yields spiked,geopolitical tensions intensified,and there was political drama in D.C.This forced the Fed to maintain its delicate balancing act aimed at reining in inflation without triggering a recession.Despite this turbulence,the U.S.economy grew above its long-r
30、un trend and the S&P 500 ended the year with a 26.3%gain.YEAR IN REVIEW2024 OUTLOOK 6 CAPITAL MARKETSAn AI-fueled rally,a correction,and then a year-end rebound for U.S.stocks.Enthusiasm around AI propelled mega cap tech stocks,with seven companies making up 90%of the S&P 500s 16.9%surge in the firs
31、t half of 2023.The equal-weighted S&P 500 saw a 7.0%gain through June,helped by moderating inflation and good economic data.Renewed inflation concerns and Fed rate hike fears triggered a 10%dip from July to October.Markets recovered in the years final months as inflation reports showed prices coolin
32、g again,culminating in full-year total returns of 26.3%for the S&P 500,13.9%for the equal-weighted S&P,and 55.1%for the Nasdaq 100.Small caps,represented by the Russell 2000,returned 16.9%.Non-U.S.markets were mixed as Japanese stocks outperformed while China weighed on emerging markets.The broader
33、non-U.S.equity complex,as measured by the MSCI All Country ex USA Index,ended the year up 15.6%(USD),trailing U.S.stocks.Japan was a standout performer,gaining 20.3%(USD),as economic growth was robust and the country saw inflation after a prolonged period of deflation.Chinas economic recovery falter
34、ed,and renewed worries about its property market weighed on sentiment.The MSCI China Index declined 11.2%.A surge in bond yields ushers in the start of a Fiscal Transition.The yield on the 10-year U.S.Treasury reached 5.0%,before ultimately ending the year at 3.9%,a level last seen prior to the Grea
35、t Recession.While the catalysts for this rise could be debated,market participants seemingly accepted we are in a new regime for interest rates,with forward rates signaling the 10-year yield will remain above 4%for decades.This rise in rates spotlighted the significant increase in debt over the last
36、 15 years,which,mixed with a higher rate regime,could spell trouble and put us on a course for a Fiscal Transition.The Bloomberg U.S.Aggregate Index returned 5.5%while the Bloomberg U.S.Municipal Bond Index returned 6.4%.High-yield bonds as measured by the Bloomberg Corporate High Yield Index were u
37、p 13.5%.EMBRACING CHANGEOUTLOOK 20242024 OUTLOOK 7 INFLATION CLOSER TO TARGETFor the last two years,inflations trajectory has been the main variable influencing our view of monetary policy,consumers,businesses,the economy,and markets.While inflation uncertainties persist,risks are now more balanced.
38、We anticipate core PCE inflation to decelerate,reaching 2.00%-2.25%by year-end,slightly below the Feds latest projections.We believe shelter prices will cool further as existing lease renewals continue to catch up to market rates and services price pressures ease as consumers dial back on spending.T
39、he labor market remains tight,but labor supply and demand continues to come into better balance.We expect more progress in 2024 with wage growth ultimately falling to the Feds target range of 3.0%-3.5%,which is a level consistent with 2%inflation.This labor market balance should result from a slowin
40、g economy,layoffs,fewer job postings,and a requisite increase in unemployment.Entering 2024,the world appears to be normalizing from the pandemic imbalances as,with the benefit of time,we are beginning to discern the enduring transformations that have taken root.These changes indicate a shift into a
41、 new regime with evolving market and economic dynamics that require a recalibration of market expectations for the years ahead.Higher rates are here to stay,initiating a Fiscal Transition for consumers,businesses,and governments.The pandemic and increasing protectionism are compelling countries and
42、businesses to diversify supply chains,leading to elevated costs.Against the backdrop of escalating geopolitical tensions,over 40 percent of the global population,including the U.S.,is set to head to the polls in 2024,potentially impacting domestic and foreign policy.Moreover,generative AI stands on
43、the cusp of reshaping industries and the economy.To successfully navigate these shifts,long-term investors must confront and comprehend these changes,maintain composure,and actively seek ways to embrace the evolving landscape,recognizing that“change is the only constant in life.”We continue to monit
44、or how companies may manage their workforce and margins amid increasing interest costs and capital spending for things like AI capabilities.Were also mindful of the potential for structural forces like worker shortages and imperfect job matches to continue to put upward pressure on wages.MONETARY PO
45、LICY A PIVOT TO EASINGAfter years of being squarely focused on taming inflation,the Fed seems poised to shift its focus back to both sides of its dual mandate:price stability and maximum employment.In the final monetary policy meeting of the year,Fed Chair Powell reaffirmed the notion that inflation
46、 doesnt have to get to its target of 2%for the Fed to begin cutting rates.This allows the Fed to possibly orchestrate a soft landing for the economy,potentially bringing inflation down further without the large job losses that have been historically associated with high inflation and tightening cycl
47、es.As a result,many market participants have interpreted this to mean that the Fed will begin easing policy as early as March.We continue to believe the consensus view is too optimistic,as the tight labor market,a strong economy,and the specter of resurging inflation will mean the Fed will stand pat
48、 on its current policy.We expect the Fed may begin to cut rates in the second half of 2024 for a total of 0.50%to 0.75%before year-end.The Feds monetary policy continues to play a key role in direction of the economy going forward.ECONOMY SLOWDOWN STILL TO COMERecession or not,as we push forward int
49、o 2024 we maintain our 2023 view that economic growth will be muted.We still see a reasonable chance of a soft landing(0.0%to 1.0%GDP growth),but acknowledge a reasonable chance of a mild recession(-0.1%to-0.5%GDP growth).The consumer,who of late may well be“spending beyond their means,”will be an i
50、mportant factor.Decelerating inflation would improve real incomes,but a slowing economy,rising unemployment,and diminished excess savings may erode consumer confidence and mute spending.As mentioned,business activity will also be in focus as we monitor spending and how companies handle increasing de
51、bt costs and a decline in consumer activity.2024 OUTLOOK 82024 OUTLOOK(continued)2024 FORECASTU.S.Real GDP0%1.0%Core PCE Inflation(4Q/4Q)2.00%2.25%Federal Funds Rate(Upper Bound)4.75%5.00%2024 OUTLOOK 9 ASSET CLASS FORECASTSStocks Were anticipating muted but positive calendar year returns for stocks
52、 in 2024,helped in part by stabilizing interest rates.We will likely need to weather increased volatility and market weakness at various points as the year progresses,especially approaching the U.S.presidential election in November.Of course,earnings always play an important role.Cooling inflation a
53、nd wage pressures will help company profit margins,while advances in AI present efficiency opportunities.However,geopolitical tensions and shifting supply chains pose challenges.At present,the consensus bottom-up earnings growth forecast for the S&P 500 is 11.5%.We believe this is too optimistic,pos
54、sibly influenced by recency bias with analysts focused on the strong economy in 2023.We see earnings growth more in line with our long-term estimate of 6.5%as the lag effect of monetary policy kicks in and influences company results.This assumption,coupled with a modest price-earnings multiple reduc
55、tion from elevated levels in late 2023,leads us to an S&P 500 forecasted 2024 total return of 6.3%and a related target of 5,000 at year-end.BondsWe believe we are in a new interest rate regime and expect interest rates to remain meaningfully above their pre-COVID average in this new business cycle.W
56、e expect the 10-year Treasury to be less volatile in 2024 and remain range-bound,hovering much of the year between 3.75%-4.25%.The 3-month T-bill and 2-year Treasury had yields of 5.3%and 4.3%,respectively,at the end of the year,so the yield curve remains inverted.As inflation cools further and inve
57、stors gain more confidence in a 2024 OUTLOOK(continued)*The Stifel CIO Office issues a Market Pulse publication when the S&P 500 closes up or down by at least 2%on a given day.*bps is basis points.2024 FORECASTS&P 500 5,000|6.3%(Total Return)10-Year Treasury(%)3.75%4.25%Market Pulse Publications*25I
58、nvestment-Grade Spreads(bps)*125 175 bpsHigh-Yield Spreads(bps)400 450 bpsFed pause and eventual easing later in the year,we expect the curve to flatten and possibly become positively sloped,driven by a decline in shorter yields.As weve discussed,credit spreads often widen out during a recession,put
59、ting downward pressure on bond prices.But given our view of muted economic growth instead of a deeper recession,we believe spreads will remain reasonably well behaved,with investment-grade corporate spreads between 1.25%-1.75%and below-investment-grade(high-yield)spreads ranging from 4.00%-4.50%.Giv
60、en the higher yields on bonds as we start the year,these forces combine to an expectation for positive bond market returns.We see fixed income remaining an important part of an asset mix strategy for two reasons:1)bonds generate reliable income,helpful to investors drawing on and spending portfolio
61、income,and 2)the diversification benefits of bonds when combined with stocks,softening total portfolio volatility.2024 OUTLOOK 102024 OUTLOOK(continued)WHAT ARE SOME OF THE CHANGES IN THE WORLD CREATING OPPORTUNITY FOR INVESTORS TO EMBRACE THIS TRANSFORMATION?AI is rapidly changing how businesses im
62、prove processes and productivity.In focus:Semiconductors,cloud computing,data storage,and cybersecurity companies driving AI advancements.Explore opportunities in AI applications within healthcare,industrials,finance,and retail.1The structural effects of the pandemic highlight the need for new suppl
63、y chain and infrastructure investments.In focus:Companies in strategic industries prioritized amid rising geopolitical tensions and supply chain restructuring.Consider investments in logistics services and infrastructure development.2Higher debt and higher rates and the ensuing Fiscal Transition cal
64、l for greater focus,and opportunities,in debt and equity investing.In focus:Companies with prudent capital allocation and manageable debt burdens that are poised to successfully navigate higher debt and rising rates while potentially capturing market share from competitors.3The 2024 global election
65、supercycle,with 40 major elections,may well transform the geopolitical landscape.In focus:Remain diversified and stick to your long-term objectives.Be prepared for risks and opportunities that may arise based on potential policy changes stemming from the election supercycle.4Increasing geopolitical
66、tensions are amplifying further deglobalization.In focus:In addition to being diversified,consider companies benefiting from increasing militarization and defense spending.Identify companies that are able to execute well globally and penetrate local markets.52024 OUTLOOK 11 THE BULL AND BEAR STILL H
67、AVE FAT TAILSPredicting what may happen in 12 months is difficult,as most forecasts,especially point forecasts,are almost always wrong to some degree.In response,we have a practice of developing three scenarios our“base case,”as discussed above,a more positive“bull case,”and a more negative“bear cas
68、e.”We do this to better understand what might happen and answer the question,“What if we are wrong?”We also try to gauge the likelihood of these upside and downside scenarios.In risk analysis,upside and/or downside risk are said to have“fat tails”when the chances of them happening are increased.And
69、we believe that is the case again this year.Weve assigned a 55%probability to our base case,a 25%probability to the bear case,and a 20%probability to the bull.These are fat tails,as was the case for our 2023 scenarios.Lets run through how our scenarios differ across three key considerations looking
70、forward:the consumer,earnings,and animal spirits.Scenario Descriptions:THE CONSUMER Consumption makes up about two-thirds of U.S.GDP,so how the consumer behaves during the year will greatly influence outcomes.Bear case|Deep Recession The pain of higher rates,more layoffs and fewer jobs,and worries a
71、bout geopolitical hotspots and the election causes the consumer to slow spending much more than expected.Bull case|Irrational Exuberance 2.0Higher rates and a slightly softer job market dont discourage consumers,who continue“spending beyond their means.”Companies are reluctant to lay off workers as
72、one of the lasting effects of the pandemic.EARNINGS Actual earnings and views about future earnings will continue to drive market performance.Bear case|Deep Recession Higher rates illustrate the fiscal challenges facing companies in 2024,and this,combined with a much less engaged consumer,triggers a
73、n unexpected earnings recession.Bull case|Irrational Exuberance 2.0Businesses manage well through the start of the Fiscal Transition started by higher rates and increased debt,and this,combined with increased consumer demand,results in double-digit earnings growth.ANIMAL SPIRITS Investors,the consum
74、er,and business leaders are all affected by animal spirits,or how emotions drive behavior,including consumer confidence.Bear case|Deep Recession A slowdown in economic growth and global contagion greatly erode animal spirits,which would be magnified even more with a geopolitical shock,like the Israe
75、l-Hamas war expanding or conflict in Taiwan.Bull case|Irrational Exuberance 2.02024 becomes a period of Irrational Exuberance 2.0,with businesses and consumers more confident than they probably should be,driving animal spirits higher.2024 OUTLOOK(continued)NAVIGATING UNPREDICTABLE MARKET FORCESFor n
76、early two years,our dynamic asset allocation(DAA)has remained predominantly neutral versus our longer-term strategic asset allocation(SAA).This neutral stance,derived from a lack of conviction amid the extraordinary uncertainties and wide range of potential outcomes stemming from the pandemic,proved
77、 prudent.The U.S.economy defied expectations for a slowdown,inflation continued to cool,and interest rates surged.Despite this being an environment that would traditionally favor value stocks,the dominant drivers of the S&P 500s return were seven mega cap technology stocks,emphasizing the unpredicta
78、ble nature of market forces.Outside the U.S.,the consensus was weary of European equities given concerns over energy supply and positive on China due its economic reopening.Contrary to expectations,Europe performed relatively well while Chinese equities declined.This circumstance underscores three k
79、ey aspects of our investment philosophy:1.Long-term anchoring:Our investment approach is anchored in a long-term view,and we believe a portfolio aligned with our strategic asset allocation is well positioned for that investment horizon.2.Deliberate neutrality:Our neutrality reflects an active decisi
80、on informed by our macroeconomic and market analysis.3.Humility in asset allocation:We approach asset allocation with humility,recognizing the difficulty of market calls and timing,so our dynamic shifts occur when we have strong conviction.ALLOCATION INSIGHTS2024 OUTLOOK 12EMBRACE THE UNPREDICTABLE
81、One key lesson from the last few years is that anything can happen.And as we discuss in this report,theres no shortage of risks on the horizon,including the global election supercycle and the possibility of a recession.However,markets often prove to be resilient over the long term despite various sh
82、ocks whether its inflation,recession,or geopolitical crisis.In response,we feel an investors strategy for long-term success is clear:embrace the unpredictable.Diversify your portfolio to soften the impact of the unforeseeable risks,and view uncertainty as opportunity.Avoid staying on the sidelines a
83、nd devise a plan to deploy excess cash methodically with your long-term goals in mind.BACK TO THE FUNDAMENTALS A new interest rate regime means rates will likely remain above levels we grew to expect in the years following the Great Recession.This brings into further focus the meaningful increase in
84、 debt over the last 15 years and the need for a more judicious approach to capital allocation.We believe this is an environment where companies with strong balance sheets and manageable debt will likely outperform,and skilled active managers in both equity and fixed income will see more opportunity
85、to create relative value.STRENGTHEN YOUR FOUNDATIONThe case for a traditional 60/40 stock and bond portfolio is even stronger now than a year ago.With yields now much higher and the global economy slowing,bonds are better positioned to provide diversification and stability in a portfolio,which shoul
86、d boost investor confidence.We continue to advocate for rebalancing even in volatile markets,and we recommend investors look to broaden equity exposure beyond mega cap technology stocks.Qualified investors may explore“alternative investments”as an added layer of diversification.LONG-TERM IS NOT SO L
87、ONG AI is a key element of our Fourth Industrial Revolution theme,one of the five megatrends we see influencing the direction of the economy and markets longer term.Moreover,theres an abundance of opportunities emerging across all of our themes,including AI,as companies integrate and adapt disruptiv
88、e technology into their business models.The future is now.1234ENTERING A NEW REGIMEAs we step into 2024,a global shift is underway,accompanied by evolving market and economic dynamics.Investors should recalibrate their portfolios for a new era in which interest rates are higher,money has a cost agai
89、n,and our economy will be facing headwinds related to a Fiscal Transition.Our key allocation insights as we start the year include:ALLOCATION INSIGHTS(continued)2024 OUTLOOK 132024 OUTLOOK 14 DYNAMIC LEANINGSASSET CLASSCURRENTCOMMENTSEQUITYU.S.Equity vs.Non-U.S.EquityWe remain neutral between U.S.an
90、d non-U.S.equity.Our base case calls for a soft landing in the U.S.,but we believe valuations have priced in this scenario and the consensus earnings outlook is too optimistic.We recognize,however,that momentum is strong and the eventual Fed easing should be supportive of U.S.stocks.Non-U.S.equity v
91、aluations are attractive;however,growth trends are diverging and Europe and China face headwinds.We guide investors to consider active management.U.S.Large Cap vs.U.S.Small CapSmall cap equity valuations remain attractive and reflect worries about an economic downturn and the greater vulnerabilities
92、 from higher financing costs.We have a preference for quality companies with strong balance sheets regardless of market capitalization.We believe there is opportunity within small cap for skilled active investors.U.S.Large Value vs.U.S.Large GrowthWe believe in this new regime investors should be di
93、versified across both value and growth styles.Within U.S.large cap,we expect returns to broaden out and have a preference for quality companies and those that are expected to benefit from our long-term investment themes such as AI and the Fourth Industrial Revolution.Non-U.S.Developed Markets vs.Eme
94、rging MarketsBoth developed and emerging markets remain vulnerable to idiosyncratic risks and headwinds stemming from geopolitical tensions and a slowing global economy.China is facing structural headwinds,and investors are worried about policy uncertainty and possible stresses in its property secto
95、r.Europe vs.JapanJapan was a solid performer in 2023,but we believe there is still the potential for relative outperformance.Japans economic growth remains positive,and corporate governance reform is likely to enhance shareholder value in the medium to long term.In Europe,weaker Chinese growth and t
96、he Russia-Ukraine war remain headwinds for the growth outlook.ALLOCATION INSIGHTS(continued)UnderweightNeutralOverweight 2024 OUTLOOK 15DYNAMIC LEANINGSASSET CLASSCURRENTCOMMENTSFIXED INCOMEU.S.Investment Grade vs.U.S.High YieldWe favor a quality tilt and prefer investment grade for passive investor
97、s.Spreads for high yield remain tight and do not appropriately reflect the increased risk of recession and credit deterioration,in our view.Corporates vs.Government vs.Agency MBSWe have a modest preference for government and mortgage-backed securities relative to investment-grade corporate bonds,whi
98、ch can be expressed with passive investments or may be implemented by active managers.Agency MBS spreads remain well above their 2021 lows,and both fundamental and technical factors are supportive of this sector.Treasury yields remain attractive and should provide an added diversification benefit if
99、 the economy deteriorates.DurationWe view duration as a diversifier in a multi-asset class portfolio given the macroeconomic uncertainty and volatility in yields,and so we remain neutral on duration as compared to the overall market.ALLOCATION INSIGHTS(continued)UnderweightNeutralOverweightALTERNATI
100、VESPrivate AssetsFor investors interested in alternative investments and able to handle illiquidity,exposure to some combination of private equity,private debt,and/or private real estate can be considered as part of a diversified portfolio.Hedge FundsFor investors interested in alternative investmen
101、ts and able to handle less liquidity who have conviction about manager skill,exposure to hedge funds can be a helpful part of a diversified portfolio.This is especially true in volatile,low-return environments.2024 OUTLOOK 16 WASHINGTON POLICY AND POLITICAL OUTLOOKContributed by Brian Gardner|Chief
102、Washington Policy StrategistThe 2024 presidential election will,to a large extent,influence the congressional and regulatory agendas for the coming year.The following reviews Washingtons agenda for next year and provides an early forecast for the 2024 elections.A BUSY START TO 2024In January,Congres
103、s must confront several pressing items,including averting a government shutdown and passing a foreign aid supplemental package.Congress will face funding deadlines of January 19 and February 2,and as of this writing,negotiators have made little progress toward passing the related appropriations bill
104、s.If appropriations bills are not passed,then Congress may pass another short-term continuing resolution(CR)to buy more time to negotiate,or even pass a full-year CR.In the absence of passing funding bills,parts of the government will shut down.Our base case is a partial government shutdown beginnin
105、g in late January,especially given that Speaker of the House Mike Johnson(R-Louisiana)opposes another short-term CR.Government shutdowns can be disruptive to government workers(including the military),who are not paid while their agencies are not funded,as well as companies relying on government ser
106、vices.For example,if unfunded,the Securities and Exchange Commission(SEC)would not be able to process registration statements,which could negatively impact the capital markets.Often,these impacts are short-lived and usually are reversed once the government reopens,so the long-term economic effects a
107、re minimal.For this reason,markets often ignore government shutdowns.For example,during the 34-day shutdown that started in December 2018 and ended in January 2019,the S&P 500 rose by over 10%.Market and geopolitical factors may well continue to influence markets more than a shutdown.Also,the Fiscal
108、 Responsibility Act(aka the debt ceiling deal)sets budget caps for discretionary spending.Unless Congress passes individual appropriations bills or waives the FRA caps as part of a CR(both unlikely),a sequestration is scheduled for April 30.If this occurs,defense spending would decrease to$850 billi
109、on from the original cap of$886 billion (and down from the fiscal year 2023 level of$858 billion),and nondefense discretionary spending would increase to$736 billion from the original cap of$704 billion(but down from the fiscal year 2023 level of$744 billion).In early 2024,Congress might consider a
110、foreign aid supplemental bill to provide additional assistance for Ukraine,Israel,and Taiwan.The Biden administration also requested additional funds for U.S.border security,but members of both parties are also pushing for changes in U.S.immigration policy.There has also been growing Republican oppo
111、sition to additional WASHINGTON POLICY AND POLITICAL OUTLOOK (continued)aid to Ukraine,especially among House Republicans,who have leverage to extract concessions.At the same time,progressive Democrats oppose some of the immigration policy changes.With the foreign aid bill at risk,some may question
112、Americas commitment to international engagement,which may increase geopolitical risks over the long term.REGULATORS RACING TO BEAT THE ELECTIONThe Biden administration will be racing to finish many outstanding regulatory proposals before the 2024 election.The Congressional Review Act(CRA)established
113、 a framework under which Congress can vote to block new regulations.Under the CRA,Congress has 60 legislative days to introduce legislation to block a rule.And if Congress adjourns before the end of the 60-day period,the clock partially resets.So the Biden administration will seek to finalize as man
114、y rules as possible to ensure the CRA occurs with the current Congress,lest Republicans sweep the 2024 elections and overturn proposed regulations that did not beat the CRA process.Among the rules in focus:New bank capital rules for banks with more than$100 billion in assets;Climate risk disclosure
115、rules(SEC);Equity market structure rules(SEC);and Fiduciary rules for retirement accounts(Department of Labor).In early 2024,we also expect the administration to finalize guidance on rules for tax credits that were part of the Inflation Reduction Act,including clean hydrogen tax credits.In addition,
116、the SEC could announce its decision on whether to approve the first spot bitcoin ETF.Also,the Consumer Financial Protection Bureau is likely to release a final rule regarding credit card late fees.2024 OUTLOOK 17ELECTION 2024:THE RERUN NO ONE WANTS TO WATCHPresidential RaceEntering 2024,it appears h
117、ighly likely that Donald Trump and Joe Biden will be renominated by their respective parties.In a replay of 2020,we currently view Mr.Trump as a slight favorite,but note this will likely change multiple times in the coming year.Mr.Trump is the clear favorite to win the Republican nomination.He holds
118、 large leads nationally as well as in the key early states of Iowa and New Hampshire.While either Ron DeSantis or Nikki Haley could gain traction late,the chances of either candidate beating Mr.Trump seem remote especially in the wake of a recent ruling by the Colorado Supreme Court.That court ruled
119、 that Mr.Trump is ineligible to hold office because he violated the 14th Amendments prohibition against insurrection and is thus ineligible to be on the states primary ballot.Putting aside the constitutional issues of the case,the ruling is likely to create a backlash that benefits Mr.Trump and puts
120、 his Republican rivals at an enormous disadvantage.On the Democratic side,President Bidens poll numbers are weak,and many Democrats have reservations about his ability to serve a second term.However,Mr.Biden is the overwhelming favorite to be the Democratic nominee.While there is a remote chance Mr.
121、Biden will reverse course and decide not to run,he would likely wait until the last possible moment to forestall lame duck status as long as possible.If Mr.Biden withdraws,Vice President Kamala Harris has an advantage,but other Democratic candidates may emerge.2024 OUTLOOK 18 A Biden/Trump rematch i
122、s unprecedented and unusual on many levels.Pending an appeal of the Colorado case to the U.S.Supreme Court,it is possible that Mr.Trump would not be on the ballot in every state.No major party candidate has run for election while under criminal indictment,much less multiple indictments.Biden and Tru
123、mp represent the two oldest candidates ever to face each other.Not since 1892 has a president lost reelection and tried a comeback four years later,when Grover Cleveland was elected,the only former president to make such a successful comeback.Also,numerous third-party candidates could still have a m
124、aterial impact on election results.The economy will be a key factor in 2024.Historically,a recession within two years of the election spells trouble for the incumbent,while sitting presidents during an expansion in those two years are typically reelected.With that said,Mr.Bidens approval rating on t
125、he economy is 37.3 percent according to the RealClearPolitics average,suggesting he is vulnerable on the economy unless his approval rating rises in 2024.Mr.Biden trails Mr.Trump in most national polls and many key states,with historically strong support from key segments of the Democratic coalition
126、(notably young voters,Black voters,and Hispanic voters)waning.For example,some polls show over 20 percent of Black voters would support Mr.Trump,but some may well“return home”to the Democratic Party and vote for Mr.Biden.Even if some disaffected Democratic voters ultimately vote for Biden,he risks l
127、osing key voters due to the lack of enthusiasm among his base.Finally,the Middle East conflict is also straining the Democratic coalition,with some sympathetic to Israel and others to Palestine.For example,Arab Americans,a key group in the swing state of Michigan,are unhappy with Mr.Bidens Middle Ea
128、st policy.While Mr.Trump will campaign heavily on the economy(he scores higher than Mr.Biden with voters on the topic),the wild card(s)for Mr.Trump are the criminal prosecutions.While the prosecutions may rally Republican voters to Mr.Trump and help him win the GOP nomination,they could work against
129、 him in the general election.A recent Wall Street Journal poll showed Trumps national lead over Biden reversing if Mr.Trump were convicted in either the January 6 or classified documents case.WASHINGTON POLICY AND POLITICAL OUTLOOK (continued)2024 OUTLOOK 19As many as five third-party candidates may
130、 well influence the presidential election,perhaps by affecting the outcome in key states:Robert F.Kennedy,Jr.(independent),Jill Stein(Green Party),Cornel West(independent),a Libertarian Party candidate,and any candidate running under the No Labels banner,such as Joe Manchin or Liz Cheney.While it re
131、mains to be seen in which states these candidates will qualify for the ballot,on balance,according to a recent Bloomberg/Morning Consult poll,the third-party candidates may hurt Mr.Biden more than Mr.Trump.2024 starts with Donald Trump as a slight favorite to win the presidency.SenateThe 2024 Senate
132、 map favors Republicans slightly.Thirty-four Senate seats are up for election,with 23 defended by Democrats,some in highly competitive races.Republicans are heavily favored to win the West Virginia seat following Joe Manchins retirement,and other competitive races are expected in Arizona,Michigan,Mo
133、ntana,Nevada,Ohio,and Pennsylvania.Republicans will defend 11 seats,with most considered“safe.”Democrats best chances to flip a Republican seat are still longshots in Florida and Texas.A stronger-than-expected showing by Mr.Biden could limit Democratic losses,while a Trump win could mean additional
134、GOP gains in the Senate.HouseDemocrats could benefit from the redrawing of congressional maps in Alabama,Louisiana,South Carolina,and especially New York.Conversely,a new map in North Carolina could help Republicans,but on balance,maps where the courts have forced revisions should benefit Democrats.
135、Even with the new maps in these five states,the House will likely follow the presidential election.WASHINGTON POLICY AND POLITICAL OUTLOOK(continued)LOOKING TO 2025Although 2025 seems a long way away,investors should consider tax law changes that may occur following the presidential election.Key par
136、ts of the Jobs and Tax Cuts Act of 2017 will expire at the end of 2025,including:Lower individual income tax rates;Changes in the alternative minimum tax;A 10 percent cap on the state and local tax deduction;A framework for pass-through businesses;and An increase in the estate tax exemption.Some est
137、imate the cost to extend the expiring 2017 tax cuts could exceed$3 trillion over 10 years.The topic may be included in the upcoming fiscal cliff and debt ceiling debates,and Congress could also consider raising revenue from other sources,including the corporate income tax,to offset revenue“lost”from
138、 extending some of the 2017 tax cuts.20|2022 OUTLOOK 2024 OUTLOOK 20GEOPOLITICAL RISK DASHBOARD:A NEW WORLDThe world has been shifting from an era of globalization to one marked by increased localization and protectionism,increasing geopolitical risks,and uncertainty.Recent events,such as Brexit,the
139、 pandemic,Russias invasion of Ukraine,the war in the Middle East,and U.S.-China competition,underscore this transition.The Stifel Geopolitical Risk Dashboard aims to identify and assess the likelihood and potential market impact of key geopolitical risks and events.Below we discuss the interconnecte
140、d themes that are shifting the world order,provide an update on some geopolitical risks to monitor in 2024,and highlight potential opportunities for investors.THEMES INFLUENCING OUR GEOPOLITICAL DASHBOARD Increased Localization and Protectionism Companies and countries continue to rethink their supp
141、ly chains,evident in policies aimed at safeguarding domestic industries and controlling the flow of goods and services.A McKinsey survey of supply chain leaders found that almost two-thirds of respondents are currently regionalizing their supply chains,up even from the inflated 44 percent level in 2
142、022.Emerging beneficiaries include Southeast Asia and Mexico,with the latter experiencing record foreign direct investment(FDI)in third quarter 2023,and a projected$150 billion in FDI over the next decade.A More Divided World Global divisions are deepening,with Western democracies aligning with the
143、U.S.and authoritarian nations with Russia and China.Last year,the BRICS bloc of developing nations(Brazil,Russia,India,China,and South Africa)expanded its membership to include six new countries,including Saudi Arabia and Iran,while NATO welcomed Finland to the alliance.A Bloomberg Economics analysi
144、s found that close to$180 billion in FDI shifted across geopolitical blocs from countries that declined to condemn Russias invasion of Ukraine to those that did.And the Israel-Hamas conflict may accelerate this theme.The word“geopolitics”was mentioned in company earnings calls and filings nearly 12,
145、000 times in 2023,almost three times as more than just two years ago.2024 OUTLOOK 21 The speed of information flow,with news available instantly on our mobile phones,may be deepening the divide,especially with social media and AI-driven feeds channeling content designed to excite and energize people
146、 on their favored topics.As a result,people may be“picking sides”more quickly and with greater emotion and conviction.In addition,AI enables bad actors to create inauthentic content intentionally designed to amplify their messages and deepen the divide even more.GEOPOLITICAL DASHBOARDFinancial Insta
147、bility This year,our Geopolitical Risk Dashboard includes a new theme,Financial Instability,which contemplates how the significant buildup of debt since the Great Recession and higher rates are leading to a Fiscal Transition that could spell trouble for consumers,corporations,and governments.Consume
148、rs will be forced to manage debt more carefully,with the increase in loan defaults and individual bankruptcies causing pain for some individuals and potentially slowing the economy.Companies will have to adjust their capital allocation practices and manage existing debt,with financially weak compani
149、es failing.And the political debate around topics like spending,deficits,and debt will come into greater focus.There are increasing risks that this Fiscal Transition could fuel severe economic and market pain both in the U.S.and elsewhere around the world.New Cold War U.S.-China and U.S.-Russia stra
150、tegic competition for economic and social influence have been evolving into hostile actions.Cybersecurity attacks,election meddling,corporate espionage,and military assertiveness are examples of this theme.The Russia-Ukraine war remains a focal point,with no signs of resolution while competing allia
151、nces are further solidifying.Russia has doubled down on its military partnership with North Korea and China,which could prolong the war in Ukraine and even increase the risk of provocations on the Korean Peninsula and in the South China Sea and Taiwan.Taiwans presidential election on January 13 coul
152、d be a turning point for the nation,depending on the outcome.China calls the race a“choice between war and peace,”and the latest polls suggest that the pro-U.S.candidate has the advantage.We dont see imminent conflict in any of these regions,but tensions and pressure may build as the year progresses
153、.Middle East Conflict Our base case scenario sees the Israel-Hamas conflict remaining contained with limited impact to global equity markets and oil prices.However,the longer the conflict goes on,the greater the risk that others will join the war.If Iran becomes more directly involved,any support fr
154、om Russia or China,given recent cooperation,would lead to even wider geopolitical ramifications.Any escalation would disrupt the flow of oil and lead to higher inflation,while also likely putting at risk recently improving Israeli relations with some Arab states.European Central Bank President Chris
155、tine Lagarde declared that“we are witnessing a fragmentation of the global economy into competing blocs,with each bloc trying to pull as much of the rest of the world closer to its respective strategic interests and shared values.”GEOPOLITICAL RISK DASHBOARD:A NEW WORLD(continued)2024 OUTLOOK 22U.S.
156、-China Competition The U.S.and China are locked in a great power struggle,with both nations aspiring for global dominance.While the U.S.aims to uphold its leadership,China seeks greater economic and geopolitical influence.To that end,the U.S.is focused on deterring Chinas technological progress and
157、announced new export bans and restrictions on investments,prompting China to counter with limitations on rare earth mineral exports crucial for semiconductors and electric vehicles.China is also increasingly focused on swaying foreign diplomacy.Last year,for example,China outlined a peace proposal f
158、or Ukraine and brokered a Saudi Arabia-Iran deal.We expect the 2024 elections may intensify risks as both presidential candidates will take an aggressive stance on China,likely causing market volatility and potentially impacting the top and bottom lines of multinational corporations.INVESTMENT CONSI
159、DERATIONS The shifting geopolitical landscape is creating risks and opportunities.Investors should consider a diversified portfolio to better manage idiosyncratic risks.A portfolio thats diversified across and within asset classes and geographic regions would likely be less susceptible to geopolitic
160、al shocks.Increased localization and protectionism will require business logistics services and infrastructure development as companies build new factories and restructure their supply chains.This will create tailwinds for many industrial and technology companies.Conflicts like the wars in Ukraine a
161、nd Gaza,along with heightened rivalry between the worlds great powers,are leading to increasing militarization and defense spending.We believe this will also translate into a greater need for self-reliance and protection of critical industries like technology,manufacturing,agriculture,and energy.Our
162、 major investment themes Securing Strategic Resources and Productive Competition take these forces into account as we develop our investment views and manage portfolios.GEOPOLITICAL RISK DASHBOARD:A NEW WORLD(continued)GLOBAL ELECTION YEARIn 2024,more than 40%of the worlds population will be voting
163、in 40 national elections,including the U.S.This has the potential to reshape the geopolitical landscape,influencing policies,international relations,and the direction of many of our geopolitical risks.2024 OUTLOOK 23 EVENTLIKELIHOODMARKET IMPACTDESCRIPTIONU.S.-China Competition107Competition for glo
164、bal leadership will impact markets;tech will continue to play an important role.The U.S.Department of Defense sees China as the“most consequential strategic competitor.”The New Cold War88The Russia-Ukraine war continues to solidify alliances and competing geopolitical blocs.U.S.-China and U.S.-Russi
165、a competition for influence is increasingly hostile.Emerging Market(EM)Political Uncertainty85EM countries are still facing elevated inflation and political instability,potentially contributing to inequality,political interference,and populist ideas.Key elections in 2024 will shape the trajectory of
166、 these challenges.Cyberattacks85Growing digitalization of our world heightens the risk of more sophisticated cyberattacks,which pose risks to individuals,organizations,and national security.Washington,D.C.Gridlock77A divided Congress heading into the 2024 elections likely means the prospect for sign
167、ificant legislation remains limited.The repeated debt limit standoffs also add to uncertainty.Financial Instability77The significant buildup of debt since the Great Recession and higher rates are leading to a Fiscal Transition,putting pressure on consumers,corporations,and governments.Major Terror A
168、ttacks74Unpredictable terrorist attacks may create disruption.The various conflicts around the world have amplified the risk of a resurgent terrorist threat.Climate Policy Error67Net zero commitments and regulation without economic and societal readiness risk triggering elevated spending,inflation,e
169、conomic inequality,and a consequential economic slowdown.South China Sea Military Conflict67China maintains a strong air and naval presence in the area,even as the U.S.upgrades airfields and other strategic infrastructure.There is potential for a military clash.European Fragmentation66Europes solida
170、rity since the pandemic is being tested again with regard to Ukraine funding,China relations,refugee migration,and fiscal rules.Middle East Conflict57Elevated tensions in the region following the Israel-Hamas war raise the risk of conflict.Theres concern that other nations,notably Iran,may become in
171、volved,escalating the situation into at least a regional crisis.North Korea Conflict54North Korea continues to improve and expand its nuclear missile capabilities.Military cooperation with Russia has strengthened,with some speculating North Korea has provided military equipment to Russia in exchange
172、 for advanced technologies.Structurally Higher Inflation58The effects of the pandemic,the war in Ukraine,U.S.-China competition,shifting demographics,and climate change could lead to a prolonged period of structurally higher inflation.Russia-West Conflict48Russia has repeatedly threatened retaliatio
173、n for NATOs supplying of military equipment to Ukraine.Ukraine and NATO funding will likely be politicized heading into 2024 elections.GEOPOLITICAL DASHBOARD*Likleihood and Market Impact on scale of 1 to 10 with 1 being least likely/low market impact and 10 being most likely/high market impact.In ea
174、ch election year,the prevailing narrative seems to suggest that our country stands at a crossroads with the potential for significant consequences.This often creates uncertainty for investors and leads to market volatility.The temptation to react impulsively to political changes can be strong,but am
175、id this uncertainty,a disciplined and long-term approach to investing becomes paramount.Here are some learnings from previous elections to help you navigate the upcoming 2024 election-year dynamics:2024 OUTLOOK 24INVESTORS HANDBOOKFOR ELECTION YEARS-12-11-10-9-7-6-5-4-2-1112Months from el
176、ection day7080900140150 Average 2008 Elections 2020 ElectionsSource:Stifel CIO Office,Bloomberg.Analysis as of December 8,2023.October 31 used as a proxy for each election date.Scaled to 100 on election date.Analysis is based on the 252 trading days before and 252 trading days after Octob
177、er 31 and includes the 1972-2020 elections.Past results are not predictitive of results in future periods.S&P 500 in the 12 months before and after election dayWHAT TYPICALLY HAPPENS TO THE STOCK MARKET IN ELECTION YEARS?The uncertainty surrounding the winning candidate and potential policy changes
178、often leads to more volatile markets.Volatility typically reaches its peak in November before subsiding to normal levels in the ensuing months as uncertainties fade.Examining the past eight election cycles reveals that,on average,the S&P 500 experienced a post-election rally of 14.5%in the 12 months
179、 following the election.KEY POINT:Expect increased volatility,but historical trends indicate that markets tend to move upward in the months following elections as easing uncertainty lowers volatility.1MARKET BEHAVIORINVESTORS HANDBOOK FOR ELECTION YEARS(continued)2024 OUTLOOK 25 PARTY INFLUENCEWHICH
180、 POLITICAL PARTY IS BETTER FOR THE ECONOMY AND MARKETS?Some studies suggest that stocks tend to do better when the government is divided.Regardless of the political party in power,factors such as the business environment and where we are in the economic cycle have a much stronger impact on markets t
181、han the elected presidents.Over time the stock market is resilient,usually rising irrespective of who is in office.2Markets trend higher,regardless of outcomeSource:Stifel CIO Office via Strategas Securities,LLC.The start date is December 29,1944.Dates of party control are based on election dates.Va
182、lues are based on total returns in USD.Shown on a logarithmic scale.1001,00010,000100,00044495459646974798489949904091419 Republican President Democratic PresidentKEY POINT:The stock markets resilience and upward trend are predominantly influenced by the business environment and economic cycles,irre
183、spective of the party of the sitting president.2024 OUTLOOK 26INVESTORS HANDBOOK FOR ELECTION YEARS(continued)S&P 500 sector returns before and after an electionConsumerStaplesUtilitiesIndustrialsCons Disc.Info TechHealthcareS&P 500FinancialsEnergyComm.Real Estate-5.0%0.0%5.0%10.0%15.0%20.0%25.0%Sou
184、rce:Stifel CIO Office,Bloomberg.October 31 used as a proxy for each election date.Elections included are 1992-2020.Past results are not predictive of results in future periods.12m before 12m afterSECTOR PERFORMANCE ARE THERE SPECIFIC SECTORS THAT TEND TO OUTPERFORM OR UNDERPERFORM?Theres no“playbook
185、”for predicting sector performance in election years.However,certain sectors may garner increased attention in the headlines,driven by the policy agenda of each candidate.Even then,not all policy proposals are approved,and its rare that a president will eliminate a sector and the jobs that come with
186、 it.KEY POINT:Candidate policy agendas will create headline noise and volatility for some sectors,creating opportunity for long-term investors.32024 OUTLOOK 27 WHAT SHOULD AN INVESTOR DO?MAINTAIN COMPOSURE.Take a breath and acknowledge that volatility is a normal part of investing,especially in elec
187、tion years.If emotions are getting the best of you,turn off the TV and consider reaching out to your Stifel Financial Advisor.Your Financial Advisor may be able to use elements of behavioral finance to gauge your level of composure to fine-tune your asset allocation and help you navigate through tum
188、ultuous market periods.STAY INVESTED.Trying to time the market in such a short period might not pay off and could hurt the long-term performance of your portfolio.Some of the worst days in the equity markets have been followed by some of the best.In fact,missing the 10 best trading days over the pas
189、t 20 years would have reduced your annual returns by 4.2%(annualized).AVOID SITTING ON CASH.Investors tend to be more conservative during an election year,investing more in money market funds.While cash equivalent yields above 5%may be attractive,they tend to lag stock and bond returns over the long
190、 term.If youve built up a sizable allocation to cash,we suggest working with your Stifel Financial Advisor to develop a plan to redeploy it.BE DIVERSIFIED.The best performing asset class often varies from year to year.Diversifying across asset classes ensures participation in the stronger ones while
191、 mitigating the impact of weaker performing classes.4Historical 10-Year Returns(Annualized)INVESTORS HANDBOOK FOR ELECTION YEARS(continued)Source:Stifel Investment Strategy via Bloomberg,as of July 31,2023,based on the S&P 500 Total Return Index.Past performance is no guarantee of future results,and
192、 individual results will vary.Invested All DaysMissing the Five Best DaysMissing the 10 Best DaysMissing the 20 Best DaysMissing the Best 30 DaysTime in the Market The Value of$1,000 Invested July 31,2003 July 31,20232024 OUTLOOK 28AI REVOLUTION:TRANSFORMING INDUSTRIES AND INVESTMENTSThroughout hist
193、ory,each wave of technological advancement has reshaped the way we live,work,and do business.For example,the personal computer led to unprecedented capabilities for productivity,communication,and the formation of new industries.And the advent of the iPhone further transformed our lives by putting po
194、werful computing and communication capabilities into our pockets,redefining how we connect,consume information,and navigate the world.Now,standing at the brink of a new era,AI is emerging as the next transformative force.2024 OUTLOOK 29 AI is a machines ability to perform tasks that typically requir
195、e human intelligence,such as recognizing patterns,learning from experience,and solving problems.AI is part of our Fourth Industrial Revolution theme,which captures the idea that technological innovation has broken down the boundaries between the physical,digital,and biological worlds.For years,weve
196、seen relatively simple examples,like IBMs“Big Blue”computer beating the reigning world chess champion,digital assistants like Siri and Alexa,or even robot vacuum cleaners.What Is AI?With the 2022 release of ChatGPT,people can see and experience firsthand the power of generative AI.Many have referred
197、 to it as the“iPhone moment”for AI.ChatGPT is a chatbot launched by OpenAI that allows the user to ask for help like one would a human.For example,one can ask ChatGPT to explain regulations,draft an e-mail or social media post,write a paper,summarize a long article in a few words,build code,or write
198、 a novel.What Is ChatGPT?LABOR MARKET TRANSFORMATIONAI has the potential to transform the labor market by creating and eliminating jobs across almost all industries.McKinsey estimates that by 2030,activities that make up almost one-third of the hours worked across the U.S.economy today could be auto
199、mated.Some jobs like office administrative support,customer service,and food service may see openings decline as tasks become automated.Many other jobs may evolve with new requirements as AI will enhance the way STEM,creative,business,and legal professionals work.INCREASING PRODUCTIVITY More than 35
200、%of S&P 500 companies referenced AI during their Q2 2023 earnings calls.AI applications can automate tasks or aid in data analysis,leading to improved productivity and cost efficiency across industries.For example,the manufacturing industry can optimize production processes and improve quality contr
201、ol.In healthcare,AI applications can help with diagnostics and patient care,improving overall patient outcomes.This increased productivity may ultimately boost wages and corporate profits.PRODUCTIVE COMPETITION One of our five long-term investment themes is Productive Competition,or the idea that ri
202、valry ultimately drives innovation,improves quality of life,and creates value for consumers and the economy.Think about how the release of the iPhone formed new industries,disrupted others,and forced business across industries to transform their business models.Similarly,we expect individuals and co
203、mpanies to strategically adopt AI,reinforcing their competitive advantage,paving the way for innovative business models,and even driving the emergence of new industries.ECONOMIC IMPACTS AI REVOLUTION:TRANSFORMING INDUSTRIES AND INVESTMENTS(continued)2024 OUTLOOK 30As long-term investors seeking to i
204、dentify investment opportunities,we have as a primary focus how well a company aligns with one or more of our themes.Consider AI and the Fourth Industrial Revolution.Of course,technology firms that enable AI come to mind.However,our focus extends beyond just technology as we carefully evaluate compa
205、nies and industries capable of integrating or disrupting with AI.INVESTMENT OPPORTUNITYENABLERS:THE BACKBONE OF AI These companies provide the essential infrastructure,tools,and support systems that empower the development and widespread adoption of AI technologies.From hardware manufacturers to dat
206、a storage solutions,enablers form the backbone of the AI ecosystem.INVESTMENT CONSIDERATIONS Companies tied to semiconductors and semiconductor equipment,cloud computing,data storage,and cybersecurity.INNOVATORS:THE EVOLUTION OF AI These are the companies that spearhead groundbreaking advancements i
207、n AI applications.Whether through cutting-edge algorithms,novel use cases,or new and improved user experiences,innovators drive the evolution of AI technology,contributing to its transformative impact across various industries.INVESTMENT CONSIDERATIONS:Leading companies with wide moats in software,I
208、T services,and technology hardware.DISRUPTORS:THE REVOLUTION OF AIThese are the companies that harness the power of AI to revolutionize traditional business models and establish new competitive moats within their market.As they redefine norms and introduce novel approaches,disruptors capitalize on A
209、Is potential to establish or reaffirm their market leadership position.INVESTMENT CONSIDERATIONS:Companies within healthcare,industrials,finance,and retail.AI REVOLUTION:TRANSFORMING INDUSTRIES AND INVESTMENTS(continued)As you review this 2024 Outlook report,you may be wondering how this work influe
210、nces our investment guidance and discretionary portfolios.While we offer forecasts for the coming year and discuss possible scenarios,when issuing investment guidance or managing our portfolios,we often take a longer-term view,looking beyond the near-term changes in market and economic conditions.We
211、 routinely analyze the current macroeconomic environment as an input into our short-,medium-,and long-term views.From time to time,we identify investment themes and megatrends that influence the direction of the economy and the markets longer term.23Based on our assessment of the economic cycle,majo
212、r investment themes,and other structural forces,we formulate long-term capital market assumptions(CMAs),which are long-term expected return,standard deviation,and correlation estimates for various asset classes.We use CMAs to build portfolios and develop our asset allocation models.Stifels Wealth Pl
213、anning Department incorporates our asset allocation models and CMAs to create a financial plan thats custom to for you.1HOW WE INVESTOUR INVESTMENT MANAGEMENT PROCESSa.Manager SelectionEach manager recommendation is unique,but we use a framework as general guide.We ask ourselves:Does the investment
214、management firm have a strong business?Does the firm provide strong support for this specific product?We may also consider the following:Experience of the investment team:Include managers that are substantively resourced and have a long tenure working together.Investment philosophy:Include managers
215、with a well-articulated,stable,and consistent philosophy.Investment process:Include managers with a process thats repeatable and aligned with the investment philosophy and expertise.Past performance:Include managers whose performance and risk characteristics are consistent with philosophy,process,an
216、d portfolio construction guidelines.Fees and other costs:Include managers with appropriate and competitive fees given the nature of the investment strategy.2024 OUTLOOK 313b.Stock SelectionWhile our analysis for each security decision is unique,we use a framework as a general guide.We ask ourselves:
217、Does the company align with our themes and economic trends?Is the company a potential disruptor in its industry?Is it competitive?Is it resilient?We may also consider the following:Strength of the management team:Include companies with proven leaders,smart deployment of capital,and a sound strategic
218、 vision.Economic moat:Include companies with wide and stable economic moats,such as industry leaders,innovators,or disruptors with unique products or services.Pricing power and profitability:Include companies that can command a premium for their product or service.Financial strength:Include companie
219、s with solid balance sheets and the ability to generate strong free cash flow.Growth potential:Include companies with the potential to maintain or capture sizeable market share.Stifel Choice Portfolios offer you the flexibility to implement an asset allocation strategy thats tailored to your unique
220、goals and objectives while drawing on Stifels resources and capabilities.You can invest in one,or several,of our mutual fund,exchange traded fund(ETF),or direct equity portfolios,or in one of our turnkey multi-asset class portfolios,which are based on your risk profile.To learn more about Stifel Cho
221、ice Portfolios and whether they are appropriate for your personal financial goals,contact your Stifel Financial Advisor.2024 OUTLOOK 32 STIFEL CHOICE PORTFOLIOS2024 OUTLOOK 33Get to Know Our Long-Term Investment ThemesTHE FIVE THEMESFOURTH INDUSTRIAL REVOLUTIONTechnological innovation has broken dow
222、n the boundaries between the physical,digital,and biological worlds.SECURING STRATEGIC RESOURCESCompanies and governments are prioritizing the development and protection of critical industries,resources,and services.SHIFTING DEMOGRAPHICSChanges in global population dynamics will bring about challeng
223、es and opportunities.THE NEW CONSUMERConsumer preferences,expectations,and behavior are altering business models and corporate strategies.PRODUCTIVE COMPETITIONRivalry ultimately drives innovation,improves quality of life,and creates value for consumers and the economy.Data as a CommodityWorkforce O
224、ptimizationFuture of TransportationEnhanced ComputingFood and Water SecurityNet Zero MovementRenewable EnergyCircular EconomyFuture of HealthEmerging Global Middle ClassAging PopulationMillennialsDigitalization of Human ConnectivityReimagined ConvenienceFuture of FinanceFuture of LeisureThe New Cold
225、 WarGeopolitical TensionsLocalizationTransforming Business Models3OUR FIVEINVESTMENT THEMES2024 OUTLOOK 34Typically,your Stifel Financial Advisor will work with you to develop an asset allocation mix strategy based on your unique objectives.Behind the scenes,he or she will consult with us the CIO Of
226、fice to help refine the investment mix that is appropriate for you.The following describes an asset allocation framework we provide to your Financial Advisor.First,your Financial Advisor will work with you to identify an appropriate risk profile,ranging from conservative to aggressive.Then three oth
227、er important choices are discussed:the equity strategy,the fixed income strategy,and liquidity preferences.U.S.-Focused Versus Global Equity:We provide two choices for the asset mix equity strategy.The U.S.-Focused offering is designed for clients who prefer to balance their non-U.S.equity exposure
228、with a preference for U.S.stocks.In this case,the U.S./non-U.S.mix is approximately 70%/30%.For clients who prefer more global exposure,we seek to align the U.S.exposure with the U.S.market capitalization in the global equity market,resulting in an approximate U.S./non-U.S.mix of 55%/45%.Taxable Ver
229、sus Tax-Sensitive Fixed Income:We provide two choices for the asset mix fixed income strategy.The Taxable offering invests in taxable bonds and is most often used by entities that do not pay income taxes,such as private foundations.The Tax-Sensitive offering assumes the investor is paying income tax
230、es and therefore focuses the majority of its fixed income exposure in tax-advantaged bonds like municipals.Liquidity Tiers:We offer three liquidity tiers in our asset allocation guidance offering.The most liquid tier,tier one,includes investment exposure to publicly traded markets that can generally
231、 be sold,if needed,and excludes alternative investments.Our second liquidity tier exposes a small percentage of the portfolio to hedge funds,products sometimes available in a limited partner(LP)format.These funds sometimes require a one-year lock-up,usually with quarterly redemption terms after that
232、.In any case,redeeming such an LP position requires advance notice and is subject to general redemption terms of the specific LP.Our third liquidity tier,often most appealing to institutional or ultra-high-net-worth investors with less need for liquidity,builds up the allocation to alternative inves
233、tments by adding positions in the private markets,such as private equity,private debt,or private real estate.Such investments usually require a lock-up of the invested capital.And finally,your Financial Advisor can work with you to elect to invest in a Strategic Asset mix,designed as a diversified s
234、trategy for the long term.Or,you can choose to invest in our Dynamic Asset mix guidance,where we will adjust our strategic leanings in consideration of shorter-term views.6 Risk ProfilesConservativeModerately AggressiveModerately ConservativeModerate GrowthModerate3 Levels of LiquidityTier 2Tier 1Ti
235、er 322 Equity ChoicesFixed IncomeChoicesStrategic(Long Term)Dynamic(Near Term)2 Time Frames Aggressive GrowthGlobalU.S.-FocusedTax-SensitiveTaxableSTIFELS APPROACH TO ASSET ALLOCATIONThe Stifel CIO Office develops economic and market analysis,and corresponding investment guidance,for the benefit of
236、Stifel clients.You can find all of our Stifel Guidance at: 1EMBRACING CHANGEOUTLOOK 2024VIDEO|PODCAST|NEWSLETTERWEEKLY|MONTHLY|QUARTERLYVIDEO|PODCAST|NEWSLETTERPopular insights from Stifels CIO Office include:WHERE TO FIND STIFEL GUIDANCE2024 OUTLOOK 35 36|2022 OUTLOOK Michael OKeeffe,CFA Chief Inve
237、stment Officer(212)328-1626 CIO OFFICEBrian Gardner Chief Washington Policy S (202)756-7764Contributing author:2024 OUTLOOK 36Jonathan BrandtBill Bridge,CIMADan Brown,CFAEvan BuengerSpecialist IISenior AnalystSenior AnalystInvestment Strategy AnalystClient EngagementManager ResearchManager ResearchM
238、acro Strategy(314)342-4203(212)328-1534(314)342-0166(314)880- Mariana ChuSophia DiMartiniColleen DunawayNik Eftimov,CFAInvestment StrategistInvestment Strategy AnalystSpecialist IIDirector ofInv.Management&GuidanceInv.Management&GuidanceClient EngagementInv.Management&Guidance(425)637-3609(212)328-2
239、083(314)342-2924(212)328- Mitchell GreenblattCharles HackettKian Homayoonfar,CFAAlec Hubbard,CFA,CAIA,CFPSenior SpecialistQuant AnalystDirector ofSenior SpecialistClient EngagementManager ResearchManager ResearchClient Engagement(314)880-1089(314)342-3020(314)342-3051(314)342-Brian Klos,CFA,CAIAChlo
240、e MauceriCarlos Mieles,CFABrian MoodySenior AnalystSpecialistInvestment StrategistInvestment StrategistManager ResearchManager ResearchInv.Management&GuidanceInv.Management&Guidance(314)342-7478(212)328-1340(212)328-1369(212)328- David Motsonelidze,CFAKurt MullerMichael Niemeier,CFADirector of Direc
241、torSenior AnalystMacro StrategyClient EngagementManager Research(212)328-1624(212)328-1635(314)342-Reagan RaleyArnez RodriguezPaul Ruppe,CFA,CPAInvestment Strategy AnalystInvestment StrategistSenior AnalystInv.Management&GuidanceInv.Management&GuidanceManager Research(212)328-1517(212)328-1070(314)3
242、42-Dori SchwartzJohn WichlenskiKevin Zawodniak,CFPEconomist Sr.AnalystSpecialistSenior AnalystInv.Management&GuidanceManager ResearchManager Research(212)328-2327(314)342-8496(314)342- 2024 OUTLOOK 37 The Standard&Poors 500 Index is a capitalization-weighted index that is generally considered repres
243、entative of the U.S.large capitalization market.The Dow Jones Industrial Average(DJIA)is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange(NYSE)and the NASDAQ.The Russell 1000 is a subset of the Russell 3000 Index.It represents the top companies by market capita
244、lization.The Russell 1000 typically comprises approximately 90%of the total market capitalization of all listed U.S.stocks.The Russell 1000 Growth Index measures the performance of those Russell 1000 index companies with higher price-to-book ratios and higher forecasted growth values.The Russell 200
245、0 Index measures the performance of the 2,000 smallest companies in the broader Russell 3000 Index,which measures the performance of the 3,000 largest U.S.companies based on total market capitalization.The Russell 2500 Index measures the performance of the 2,500 smallest companies in the broader Rus
246、sell 3000 Index,which measures the performance of the 3,000 largest U.S.companies based on total market capitalization.The Russell Microcap is defined as a capitalization-weighted index of 2,000 small cap and micro cap stocks that captures the smallest 1,000 companies in the Russell 2000,plus 1,000
247、smaller U.S.-based listed stocks.The Dow Jones U.S.Select Dividend Index aims to represent the U.S.s leading stocks by dividend yield.The S&P 500 Dividend Aristocrats measures the performance of S&P 500 companies that have increased dividends every year for the last 25 consecutive years.The Index tr
248、eats each constituent as a distinct investment opportunity without regard to its size by equally weighting each company.The S&P 500 Health Care Index comprises those companies included in the S&P 500 that are classified as members of the GICS health care sector.The Euro STOXX 50 Index represents the
249、 performance of the 50 largest companies among the 19 supersectors in terms of free-float market capitalization in 11 Eurozone countries.The Nikkei 225 Index is a price-weighted index of the 225 top Japanese companies listed in the Tokyo Stock Exchange.The MSCI EAFE Index(Europe,Australasia,and the
250、Far East)is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets,excluding the U.S.and Canada.The MSCI EM(Emerging Markets)Europe,Middle East,and Africa Index is a free float-adjusted market capitalization-weighted index tha
251、t is designed to measure the equity market performance of the emerging market countries of Europe,the Middle East,and Africa.The MSCI China Index captures large and mid-cap representation across China A,H,and shares,Red chips,P chips,and foreign listings(e.g.ADRs).With 741 constituents,the index cov
252、ers about 85%of this China equity universe.The MSCI Europe Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of the developed markets in Europe.The MSCI World Index is a free float-adjusted market capitalization-weighted ind
253、ex that is designed to measure the equity market performance of developed markets.The MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets(DM)countries(excluding the U.S.)and 25 Emerging Markets(EM)countries.The Bloomberg U.S.Treasury Bills Index include
254、s U.S.Treasury Bills that have a remaining maturity from one month up to(but not including)12 months.It excludes zero coupon strips.The Bloomberg Global Aggregate Index is market value-weighted inclusive of accrued interest and covers the most liquid portion of the global investment-grade fixed-rate
255、 bond market,including government,credit,and collateralized securities.The Bloomberg U.S.Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade,U.S.dollar-denominated,fixed-rate taxable bond market.The index includes Treasuries,government-related,and corporate se
256、curities,MBS(agency fixed-rate and hybrid ARM pass-throughs),ABS,and CMBS(agency and nonagency).Provided the necessary inclusion rules are met,U.S.Aggregate-eligible securities also contribute to the multicurrency Global Aggregate Index and the U.S.Universal Index,which includes high yield and emerg
257、ing markets debt.The Bloomberg U.S.Government/Credit Index is a broad-based flagship benchmark that measures the non-securitized component of the U.S.Aggregate Index.It includes investment-grade,U.S.dollar-denominated,fixed-rate Treasuries,government-related,and corporate securities.The Bloomberg Mo
258、rtgage-Backed Securities Index is a measurement of the movement of the 15-and 30-year fixed rate securities backed by mortgage pools of the Government National Mortgage Association(GNMA),the Federal Home Loan Mortgage Corporation(FHLMC),and the Federal National Mortgage Association(FNMA).All returns
259、 are market value-weighted inclusive of accrued interest.The Bloomberg U.S.Corporate High-Yield Bond Index covers the U.S.dollar-denominated,non-investment-grade,fixed rate,taxable corporate bond market.Securities are classified as high yield if the middle rating of Moodys,Fitch,and S&P is Ba1/BB+/B
260、B+or below.The index excludes emerging markets debt.The U.S.Corporate High-Yield Bond Index is part of the U.S.Universal and Global High-Yield Indices.The Bloomberg U.S.Municipal Bond Index covers the U.S.dollar-denominated long-term,tax-exempt bond market.The index has four main sectors:state and l
261、ocal general obligation bonds,revenue bonds,insured bonds,and pre-refunded bonds.The Credit Suisse Leveraged Loan Index tracks the investable market of the U.S.dollar-denominated leveraged loan market.It consists of issues rated“5B”or lower,meaning that the highest rated issues included in this inde
262、x are Moodys/S&P ratings of Baa1/BB+or Ba1/BBB+.All loans are funded term loans with a tenor of at least one year and are made by issuers domiciled in developed countries.The Dow Jones U.S.Select REIT Index intends to measure the performance of publicly traded REITs and REIT-like securities.The inde
263、x is a subset of the Dow Jones U.S.Select Real Estate Securities Index(RESI),which represents equity real estate investment trusts(REITs)and real estate operating companies(REOCs)traded in the U.S.The indices are designed to serve as proxies for direct real estate investment,in part by excluding com
264、panies whose performance may be driven by factors other than the value of real estate.The BofA Merrill Lynch Adjustable Rate Preferred Securities Index tracks the performance of U.S.dollar-denominated investment-grade floating rate preferred securities publicly issued in the U.S.domestic market.Qual
265、ifying securities must have an investment-grade rating(based on an average of Moodys,S&P,and Fitch)and must have an investment-grade-rated country of risk(based on an average of Moodys,S&P,and Fitch foreign currency long-term sovereign debt ratings).The BofA Merrill Lynch Core Plus Fixed Rate Prefer
266、red Securities Index tracks the performance of fixed rate U.S.dollar-denominated preferred securities issued in the U.S.domestic market.Qualifying securities must be rated at least B3(based on an average of Moodys,S&P,and Fitch)and must have an investment grade-rated country of risk(based on an aver
267、age of Moodys,S&P,and Fitch foreign currency long-term sovereign debt ratings).The Zillow Observed Rent Index(ZORI)is a smoothed measure of the typical observed market rate rent across a given region.ZORI is a repeat-rent index that is weighted to the rental housing stock to ensure representativenes
268、s across the entire market,not just those homes currently listed for-rent.The index is dollar-denominated by computing the mean of listed rents that fall into the 40th to 60th percentile range for all homes and apartments in a given region,which is once again weighted to reflect the rental housing s
269、tock.Details available in ZORI methodology.INDEX DESCRIPTIONS 38|2022 OUTLOOK 2024 OUTLOOK 38The BofA Merrill Lynch U.S.High Yield Master II Index is a market value-weighted index of all domestic and Yankee(bonds denominated in U.S.dollars and issued in the U.S.by foreign entities)high-yield bonds,i
270、ncluding deferred interest bonds and payment-in-kind securities.The Bloomberg Commodity Index(“BCOM”or the“Index”)is designed to be a highly liquid and diversified benchmark for commodity investments.The HFRI Fund Weighted Composite Index is an equal-weighted index utilized by numerous hedge fund ma
271、nagers as a benchmark for their own hedge funds.All single-manager HFRI Index constituents are included in the HFRI Fund Weighted Composite Index,which accounts for over 2,200 funds listed on the HFR database.Funds included in the index must report monthly returns,report net of all fees returns,repo
272、rt assets in U.S.dollars,and have at least$50 million under management or have been actively trading for at least 12 months.Cash&Cash Equivalents is represented by the Bloomberg U.S.Treasury 3-6 Months Bill Index,comprised of treasury bills issued by the U.S.government with less than one year to mat
273、urity.U.S.Govt Bonds is represented by the Bloomberg U.S.Government Bond Index,comprised of the U.S.Treasury and U.S.Agency indexes.U.S.Corp IG Bonds is represented by the Bloomberg U.S.Corporate Bond Index,comprised of the investment grade,fixed-rate,taxable corporate bond market.High Yield Bonds i
274、s represented by the Bloomberg U.S.Corporate High Yield Bond Index,comprised of U.S.dollar-denominated,high yield,fixed-rate corporate bond market securities.U.S.LC(Large Cap)equities is represented by Russell 1000 Index,comprised of 1,000 of the largest U.S.securities based on a combination of thei
275、r market cap and current index membership.U.S.SC(Small Cap)equities is represented by the Russell 2000 Index,comprised of 2,000 of the smallest U.S.securities based on a combination of their market cap and current index membership.Dev Intl Equities is represented by the MSCI EAFE Index,comprised of
276、equity securities that belong to markets outside of the U.S.and Canada.EM Equities is represented by the MSCI EM Index,comprised of equity securities that belong to emerging markets.Moderate Bench stands for moderate benchmark portfolio return,which is a blended portfolio of stocks(60%weight,represe
277、nted by MSCI AC World Index)and bonds(40%weight,represented by Bloomberg U.S.Government/Credit Index).Indices are unmanaged,do not reflect fees and expenses,and you cannot invest directly in an index.Past performance is no guarantee of future results.Index returns include the reinvestment of dividen
278、ds but do not include adjustments for brokerage,custodian,and advisory fees.ASSET CLASS RISKS AND DESCRIPTION OF TERMSBonds Bonds are subject to market,interest rate,and credit risk.Prices on bonds and other interest rate-sensitive securities will decline as interest rates rise.Municipal bonds may b
279、e subject to state and alternative minimum taxes,and capital gains taxes may apply.High yield bonds have greater credit risk than higher quality bonds.Bond laddering does not assure a profit or protect against loss in a declining market.Yields and market values will fluctuate,and if sold prior to ma
280、turity,bonds may be worth more or less than the original investment.Cash Equivalents Portfolios that invest in very short-term securities provide taxable or tax-advantaged current income,pose little risk to principal,and offer the ability to convert the investment into cash quickly.These investments
281、 may result in a lower yield than would be available from investments with a lower quality or longer term.Duration Duration is a measure of the sensitivity of the price the value of principal of a fixed-income investment to a change in interest rates.Duration is expressed as a number of years.Equiti
282、es Portfolios that emphasize stocks may involve price fluctuations as stock market conditions change.Small and mid capitalization stocks are typically more volatile and carry additional risks,since smaller companies generally are not as well established as larger companies.International/Global lnves
283、ting/Emerging Markets There are special considerations associated with international and global investing,including the risk of currency fluctuations and political and economic events.Investing in emerging markets may involve greater risk and volatility than investing in more developed countries.Alt
284、ernative Investments or Non-Traditional Assets Alternative investments may include,but are not limited to:Real Estate Investment Trusts(REITs),Commodities,Futures,Hedge Funds,Venture Capital,Limited Partnerships,Private Equity,etc.Real Estate When investing in real estate companies,property values c
285、an fall due to environmental,economic,or other reasons,and changes in interest rates can negatively impact the performance.Commodities and Futures The risk of loss in trading commodities and futures can be substantial.You should therefore carefully consider whether such trading is suitable for you i
286、n light of your financial condition.The high degree of leverage that is often obtainable in commodity trading can work against you as well as for you.The use of leverage can lead to large losses as well as gains.Hedge Funds Investors should be aware that hedge funds often engage in leverage,short-se
287、lling,arbitrage,hedging,derivatives,and other speculative investment practices that may increase investment loss.Hedge funds can be highly illiquid,are not required to provide periodic pricing or valuation information to investors,and often charge high fees that can erode performance.Additionally,th
288、ey may involve complex tax structures and delays in distributing tax information.While hedge funds may appear similar to mutual funds,they are not necessarily subject to the same regulatory requirements as mutual funds.Venture Capital Venture capital investments involve substantial risks.The risks a
289、ssociated with investing in companies in the start-up or expansion stages of development are greater than those of companies in later stages,because the companies business concepts generally are unproven and the companies have little or no track record.Limited Partnerships Generally,limited partners
290、hip investments are suitable only for a narrow class of relatively sophisticated investors.Limited partnership investments may be speculative in nature and be subject to resale restrictions or illiquidity.An investment is appropriate only for investors who have the capacity to absorb a loss of some
291、or all of their investment.Private Equity Private equity funds are not appropriate for all investors.Investors should be aware that private equity funds may contain speculative investment practices that can lead to a loss of the entire investment.Private equity funds may invest in entities in which
292、no secondary market exists and,as such,may be highly illiquid.The funds are not required to provide periodic pricing or valuation information to investors and often charge high fees that can erode performance.Additionally,they may involve complex tax structures and delays in distributing tax informa
293、tion.Mutual Funds and Exchange Traded Funds The investment return and principal value of an investment in funds will fluctuate,so that an investors shares,when redeemed,may be worth more or less than their original cost.ETFs trade like a stock and may trade for less than their net asset value.There
294、will be brokerage commissions associated with buying and selling exchange traded funds unless trading occurs in a fee-based account.DISCLOSURES2024 OUTLOOK 39 Standard Deviation Standard deviation is a measure of the dispersion of a set of data from its mean.It is calculated as the square root of va
295、riance by determining the variation between each data point relative to the mean.If the data points are further from the mean,there is higher deviation within the data set.RISK PROFILESRP 1 Conservative A conservative investor values protecting principal over seeking appreciation.This investor is co
296、mfortable accepting lower returns in exchange for a higher degree of liquidity and/or stability.Typically,a Conservative investor primarily seeks to minimize risk and loss of principal.RP 2 Moderately Conservative A moderately conservative investor values principal preservation,but is comfortable ac
297、cepting a small degree of risk and volatility to seek some degree of appreciation.This investor desires greater liquidity,is willing to accept lower returns,and is willing to accept minimal losses.RP 3 Moderate A moderate investor values reducing risks and enhancing returns equally.This investor is
298、willing to accept modest risks to seek higher long-term returns.A moderate investor may endure a short-term loss of principal and lower degree of liquidity in exchange for long-term appreciation.RP 4 Moderate Growth A moderate growth investor values higher long-term returns and is willing to accept
299、considerable risk.This investor is comfortable with short-term fluctuations in exchange for seeking long-term appreciation.The moderate growth investor is willing to endure larger short-term losses of principal in exchange for the potential of higher long-term returns.Liquidity is a secondary concer
300、n to a moderate growth investor.RP 5 Moderately Aggressive A moderately aggressive investor primarily values higher long-term returns and is willing to accept significant risk.This investor believes higher long-term returns are more important than protecting principal.A moderately aggressive investo
301、r may endure large losses in favor of potentially higher long-term returns.Liquidity may not be a concern to a moderately aggressive investor.RP 6 Aggressive An aggressive investor values maximizing returns and is willing to accept substantial risk.This investor believes maximizing long-term returns
302、 is more important than protecting principal.An aggressive investor may endure extensive volatility and significant losses.Liquidity is generally not a concern to an aggressive investor.A NOTE ON RISK ASSESSMENTS The Stifel Financial ID(“SFID”)is a proprietary questionnaire which helps us understand
303、 an investors attitudes toward and emotions about investing.We can use a clients Financial ID to help manage his/her/their investing experience.“Risk Attitude”is one of the six dimensions we measure.It is a behavioral assessment of the individuals feelings and appetite for risk.Separately,we use a d
304、edicated Risk Assessment Questionnaire(“RAQ”),which is an industry-standard requirement,in the process of opening and maintaining any account here at Stifel.The RAQ results in a specific“Risk Tolerance”score based on such considerations as time horizon,income requirements,and liquidity a need,which
305、is used to describe a specific accounts investment objective and to determine the suitability of any given investment for that account.In the situations where a clients Risk Attitude and the Risk Tolerance for that clients account(s)is(are)different,it is important to review them both to determine w
306、hether changes in the management of the account are warranted.IMPORTANT NOTES AND DISCLOSURES The recommendations made for your actual portfolio will differ from any asset allocation or strategies outlined in this document.The model portfolios are not available to investors since they represent inve
307、stment ideas,which are general in nature,and do not include fees.Your asset allocation will be customized to your preferences and risk tolerance,and you will be charged fees.You should ensure that your portfolio is updated or redefined when your investment objectives or personal circumstances change
308、.Diversification and asset allocation do not ensure a profit or guarantee against losses.Investing involves risk,including the possible loss of principal.Any data on past performance contained herein is no indication as to future performance.The value of any investment may fluctuate as a result of m
309、arket changes.The information in this document is not intended to predict actual results,and no assurances are given with respect thereto.Assumptions are estimates based on historic performance and an evaluation of the current market environment.References to future expected returns and performance
310、do not constitute a promise of performance for any asset class or investment strategy,nor should they be relied on as advice or interpreted as a recommendation to engage in the purchase or sale of any security or financial product.The assumptions are subjective estimates based on circumstances and e
311、vents that may not occur.Further,any valuations given in this document may not accurately reflect the values at which investments may actually be bought or sold,and no allowance has been made for taxation.Dollar-cost averaging does not assure a profit or protect against a loss.Investors should consi
312、der their ability to continue investing during periods of falling prices.The products mentioned in this document may not be suitable for all types of investors.The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is not a complete su
313、mmary or statement of all available data,nor is it considered an offer to buy or sell any securities referred to herein.Opinions expressed are subject to change without notice and do not take into account the particular investment objectives,financial situation,or needs of individual investors.There
314、 is no guarantee that the figures or opinions forecasted in this report will be realized or achieved.Employees of Stifel,Nicolaus&Company,Incorporated or its affiliates may,at times,release written or oral commentary,technical analysis,or trading strategies that differ from the opinions expressed wi
315、thin.Investing in securities involves risk.Stifel does not guarantee favorable investment outcomes,nor does it provide any guarantee against investment losses.You are urged to review all prospectuses and other offering information prior to investing.Past performance is not a guarantee of future perf
316、ormance.Rebalancing may have tax consequences,which you should discuss with your tax advisor.This material is provided by Stifel for information purposes only and does not constitute legal or tax advice.Neither Stifel nor its associates render legal or tax advice.Please consult with your legal and t
317、ax advisors regarding your particular circumstances.Stifel Financial Corp.(NYSE:SF)is a financial services holding company headquartered in St.Louis,Missouri,that conducts its banking,securities,and financial services business through several wholly owned subsidiaries.Stifels broker-dealer clients a
318、re served in the United States through Stifel,Nicolaus&Company,Incorporated;Keefe,Bruyette&Woods,Inc.;Miller Buckfire&Co.,LLC;and Stifel Independent Advisors,LLC,and in the United Kingdom and Europe through Stifel Nicolaus Europe Limited.The Companys broker-dealer affiliates provide wealth managemen
319、t,investment banking,trading,investment advisory,and related financial services to individual investors,professional money managers,businesses,and municipalities.Led by Stifel Chief Investment Officer Michael OKeeffe,the Stifel CIO Office is comprised of several investment professionals.The team wor
320、ks collaboratively with other Stifel professionals to develop macroeconomic analysis,market analysis,strategic and dynamic asset allocation guidance,applied behavioral finance,and specific investment solutions for advisors and clients.Stifel,Nicolaus&Company,Incorporated|Member SIPC&NYSE| One Financial Plaza|501 North Broadway|St.Louis,Missouri 63102|(314)342-2000 Copyright 2024 Stifel.40|2022 OUTLOOK 2024 OUTLOOK 40One Financial Plaza|501 North Broadway|St.Louis,Missouri 63102 Stifel,Nicolaus&Company,Incorporated|Member SIPC&NYSE|