By Tom Richardson
A rocketing uranium price, a bull run for gold, a rebound in inflation, a debt crisis in the United States and the decline of ethical investing.
These are among some of the left-field predictions made by money managers for the coming year. And they come as markets – both in Australia and overseas – seesaw, driven by hope the Federal Reserve in the United States will cut interest rates several times and concerns about volatility in the Middle East and Ukraine.
Geoff Wilson, Wilson Asset Management
Geoff Wilson, the prominent investor who runs Wilson Asset Management, points to bad debt and problems with commercial real estate as one left-field issue this year.
“The Fed can fix liquidity issues in the banking system, but it cannot fix [bad debt] issues,” he says, “If we get credit stress on rising jobless numbers or the like, commercial real estate loans are a catalyst for problems.
“A large non-bank institution, say an insurer, could run into trouble if a book loaded with commercial real estate loans blows up. You know, the private credit market is worth $US1.3 trillion ($1.9 trillion) and it’s unregulated. A lot of these private equity assets are illiquid, and any forced asset sales could morph into contagion.”
Wilson says he doesn’t think this is likely in 2024 – but it is a risk to consider. Black swan events, he adds, are by nature extremely negative but impossibly difficult to predict.
Among known unknowns, Mr Wilson says, is the potential for a tumble in the value of the US dollar after a two-year bull run. In turn, that could stoke the value of gold and other commodities as the US dollar’s relative purchasing power retreats.
“The Global South countries – Brazil, India, Pakistan, Indonesia and China – are buying gold, and there’s this argument the US dollar will be debased,” Wilson says. “And governments globally have unsustainable levels of debt and the only way out is to inflate their way out. So absolutely, gold could soar.”
Read more in the Australian Financial Review.
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