As we entered 2024, commentators and analysts alike were feeling positive that the Federal Reserve would signal to the market that they were ready to cut rates, possibly as early as the second quarter.

Those hopes were somewhat dashed last month when US inflation came in at 3.2%, still above the Federal Reserve’s target of 2% but down a lot from the 9% heights that it reached last year. So, what does this mean for investors?

I joined up with peers and colleagues in January this year on our Joint Investment Forum roadshow and it was great to catch-up with so many clients across the nine events that we hosted. One of the most consistent topics of conversation was how long might interest rates remain at these higher levels.

Based on the inflation print from the US in February it seems that we’re going to have these higher rates for longer than we might have hoped at the start of the year. So how should we be thinking about investing in this environment? Simply put, we think taking a total return approach to investing which incorporates a dividend or interest or income component in the investment process will be key to achieving successful investment outcomes for clients in 2024.

Watch out for another short video accompanying this one featuring my colleague Roger Webb which outlines the prospects and opportunities on offer for investors in fixed income in this environment.

From an equities perspective we continue to see demand and interest for our equity income strategies. Leveraging the power of dividends in our investment process leads to a more ‘blended’ style outcome, something that clients are starting to favour instead of following an explicit growth or indeed value path.

We think there are some great companies around the globe who are generating good cash flows, have little or no debt on their balance sheets and are now actively returning profits to shareholders in the form of dividends. In an environment of higher rates for longer, we think taking an equity income approach to investing provides the best way to deliver positive total returns to clients over the prevailing rate of interest that they can get on their cash deposits.

So, we’ve covered fixed income, we’ve covered equities and now to our third income-producing asset class - real estate.

Much has been written about the challenges that property funds face in the UK, but if you believe in income as an investing methodology then you can’t ignore property as an asset class. Direct property continues to be a good diversifier to equities and fixed income in clients’ portfolios and the income you receive as an investor is, in effect, your total return. We continue to receive good yields across our global direct property portfolio so when you think about building a portfolio for today’s environment, please consider the benefits of having an exposure to real estate.

If you would like more information on any of our strategies in equity, fixed income, or real estate head on over to our website www.abrdn.com.