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Investment Strategy

Published December 4, 2023 | 10 min read time

Weekly market insights and possible impacts on investors from the Wells Fargo Investment Institute Global Investment Strategy team.

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Spotlight: U.S. dollar should remain resilient — but not for long

  • The U.S. Dollar Index in 2023 has held near its strongest level since 2002, but we expect the greenback to depreciate modestly in the second half of 2024.
  • Nevertheless, we expect the dollar’s near-term downside to be contained. Our belief is that the U.S. dollar will continue to display resilience into the first half of 2024 as U.S. dollar weakness at the beginning of a global economic rebound usually starts with Federal Reserve (Fed) rate cuts.

Equities: Card volume suggests U.S. consumer stable, but losing steam

  • After a strong 2021 and 2022, card volume growth has slowed during 2023, implying a moderation in consumer strength.
  • Using 2019 as a baseline and considering the impact of accumulated inflation, real consumer spending growth appears to be slowing.

Fixed Income: Municipals continued stellar track record of repayment

  • Municipal defaults have continued to be infrequent, and we view this as reflective of the resilience of municipal borrowers generally.
  • When defaults have occurred, they have generally been in a narrow band of sectors that investors should be aware of.

Real Assets: REIT third-quarter earnings growth moderates

  • While many real estate investment trusts generated a reasonable same-store net operating income increase, growth in funds from operations generally moderated from recent quarters.
  • We recommend investors considering REITs focus on data center and industrial REITs given our expectations for positive long-term demand drivers.

Alternatives: Buyout exit values remain in a downward trend

  • The environment for buyout deals remains challenged, as higher interest rates, a lackluster initial public offering market, and a slower fundraising environment continue to limit activity and depress valuations.
  • We believe lower valuations are contributing to a shift toward a more buyer-friendly market, which may be an opportunity for disciplined, qualified investors who are able to commit new capital throughout the downturn.

Article written by:

Global Fixed Income Strategist
Investment Strategy Analyst

Equity Sector Analyst — Payments, Payroll, and IT Services
Municipal Analyst
Equity Sector Analyst — Real Estate

Global Alternative Investment Strategist