The US structured products market, much like a seasoned roller coaster, is no stranger to heart-stopping twists and exhilarating turns. As we peek over the new record annual sales of over $125 billion and look at 2024, it’s clear that our financial theme park is gearing up for another wild ride. Get ready to throw your hands in the air (metaphorically, of course) as we explore our top 5 predictions that are set to leave their mark on this thrill-packed landscape.
So, what’s in store for us this time? Will we loop through economic uncertainty, take a daring plunge into volatility, or execute a perfect financial somersault? Fear not; I’ve got you covered with my crystal ball – or, in this case, my predictive prowess – unveiling the mysteries that lie ahead. Fasten your seatbelts and hold onto your spreadsheets; here are my top 5 predictions for the financial roller coaster that is the US structured products market in 2024.
- Interest Rate Products Sales Plunge: In a surprising turn of events, the structured products market is set to witness a substantial decline in interest rate product sales. Our projections indicate that sales will halve in 2024, marking a notable departure from previous trends. The driving forces behind this plunge are multifaceted, including changing economic conditions and global monetary policy shifts towards rate cuts. Market participants need to brace themselves for a new reality and adapt their strategies accordingly.
- Upward Trend in Risk Control Indices: Expect an upward trend in Risk Control Indices, driven by an inverted yield curve and lower volatility. This shift in market dynamics suggests a growing emphasis on risk management strategies. Investors and financial institutions are likely to turn to these indices as tools for navigating uncertain times. The rise of Risk Control Indices reflects a broader awareness of the need for robust risk mitigation measures in the face of evolving market conditions and especially the growth of MLCDs and capital protected notes.
- Autocalls Surge in Q1, Early Expiries Expected: The first quarter of 2024 is poised to witness a significant surge in Autocalls, leading to earlier-than-expected product expirations. Investors can anticipate heightened activity in this particular autocall category as market dynamics and investor sentiment align. The surge in Autocalls underscores the importance of staying attuned to market trends and adapting investment strategies promptly to capitalize on emerging opportunities.
- Intensified Competition from Financial Giants: Brace for heightened competition in the structured products arena, particularly from financial powerhouses such as UBS and Morgan Stanley. These industry giants are gearing up to bring more competition to JP Morgan dominance, bringing innovation and strategic prowess to the forefront. Market participants should be prepared for a more competitive landscape, prompting a renewed focus on differentiation and value creation to stay ahead in the game.
- New record year in the US: Looking ahead to 2024, the structured products market is poised to benefit from favourable conditions. Total sales are projected to fall within the range of $117 billion to $135 billion, presenting ample opportunities for growth and innovation in the coming year.
The US structured products market is on the brink of transformative changes in 2024. As interest rate product sales experience a significant downturn, Risk Control Indices gain prominence, and Autocalls witness a surge, market players must navigate these shifts strategically. Additionally, intensified competition from financial giants adds a layer of complexity to the landscape, urging participants to stay agile and innovative in their approaches. As we usher in the new year, these predictions serve as a guide for investors and industry professionals alike, offering insights into the evolving dynamics of the US structured products market.
As this will be the last unstructured reflections of 2023, we would like to wish you happy holidays from the WSD group.
