Wealth Outlook 2024 - Slow then grow

11 Wealth Outlook 2024 | Our outlook Slow then grow Considerations: • Growth is likely to slow in early 2024, but we see no synchronized collapse across the global economy, as many fear. • The latter half of 2024 should show a return to sustainable economic momentum as well as an improvement in corporate earnings. • We expect global economic growth to strengthen in 2025. This should become apparent to investors as earnings estimates for 2025 rise. We expect a 12% increase in earnings per share (EPS) over the next two years. • The two pillars of investment returns – income and growth – have been reinvigorated. Therefore, this a very good time to build new balanced portfolios or to add to existing ones. • Valuations for key elements of core portfolios are more attractive today. Our 10-year Strategic Return Estimates¹ ¹ Source: Citi GlobalWealthAllocationTeam. StrategicReturnEstimates (SREs) for 2024basedondataOctober 2023, prior StrategicReturnEstimates for 2023 (based on data from October 2022) and 2022 (based on data as of October 2021). Returns estimated in US Dollars. All estimates are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events. Strategic Return Estimates are no guarantee of future performance. Past performance is no guarantee of future returns. Strategic Return Estimates based on indices are Citi Global Wealth’s forecast of returns for specific asset classes (to which the index belongs) over a 10-year time horizon. Indices are used to proxy for each asset class. The forecast for each specific asset class is made using a proprietary methodology that is appropriate for that asset class. Equity asset classes utilize a proprietary forecastingmethodology based on the assumption that equity valuations revert to their long-term trend over time. The methodology is built around specific valuation measures that require several stages of calculation. Assumptions on the projected growth of earnings and dividends are additionally applied to calculate the SRE of the equity asset class. Fixed Income asset class forecasts use a proprietary forecasting methodology that is based on current yield levels. Other asset classes utilize other specific forecasting methodologies. SRE do not reflect the deduction of client fees and expenses. Past performance is not indicative of future results. Future rates of return cannot be predicted with certainty. Investments that pay higher rates of return are often subject to higher risk and greater potential loss in an extreme scenario. The actual rate of return on investments can vary widely. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index. All SRE information shown above is hypothetical not the actual performance of any client account. Hypothetical information reflects the application of a model methodology and selection of securities in hindsight. No hypothetical record can completely account for the impact of financial risk in actual trading. for the constituents of global portfolios have doubled from two years ago. (For a complete view, see page 38 . ) • Yields in the US have risen toward two- decade highs. We think investors should take advantage of them now. Inflation-adjusted “real” Treasury yields of 2.5% are higher than in 80% of all periods over the past 25 years. Broader US fixed income yields are 4% above expected inflation. • Equity valuations are more attractive now. Except for large cap technology, many sectors trade at moderate valuations. Accordingly, we have already increased our exposure to small- and mid-sized growth equities and are likely to add more equity exposure over the year to come. • While supply shocks are a possibility, we expect the upcoming period of slower growth to take pressure off labor markets. We expect these trends to alter the course for monetary policy. That said, we do not expect the US Federal Reserve (Fed) to push policy rates back toward zero or resume quantitative easing.