Wealth Outlook 2024 - Slow then grow

55 Wealth Outlook 2024 | Opportunistic Our top 10 high conviction potential opportunities At Citi Global Wealth, we have long viewed the wealth management process as a combination of “core” and “opportunistic” investments. Core carries most of the weight, both in terms of the amount of a client’s portfolio allocated to the assets, and in getting clients to their long-term strategic destinations. We make “core” allocations to benchmarked asset classes, based on a client’s risk profile and investment objectives and our rolling 10-year Strategic Return Estimates (SRE).¹ ¹ Source: CGW Global Asset Allocation and Quantitative Research Team. Strategic Return Estimates (SREs) for 2024 based on data October 2023, prior Strategic Return Estimates for 2023 (based on data fromOctober 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. Indexes 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. As the SREs and other parameters shift, we periodically make minor adjustments. Core investments are the bedrock of every client’s portfolio. Their role is to keep the portfolio steady and generally moving in the right direction. At the same time, we recognize that some clients seek returns over shorter time horizons. So, we are continually looking for ways to identify timely, investible opportunities that may benefit from their present undervaluation, a likely change in market perception or faster growth than is expected, especially over the nearer (call it two-year) time frame. These opportunities are almost by definition high- conviction and are thoughtfully executed without putting a client’s long-term strategic objectives at risk. If we were to attach rough percentages to the two – it might be 85% to core, 15% to these various side investments and areas of emphasis. Potential opportunities like the 10 that follow are therefore incremental, quite interesting and should be considered according to investor risk profile and investment objectives. As we were putting together this year’s Wealth Outlook, we identified an assortment of high- conviction opportunities. 2023 has been a year of conflicting signals about markets and the economy. In the second half, however, some of the major questions around interest rates and inflation pressures have begun to resolve. As we triangulate these current developments with the larger, longer-term (i.e., decade-plus) trends that guide our strategic thinking (see Unstoppable trends , starting with page 76 ) , we have become more convinced that the 10 ideas presented herein have merit.