🌏 2024 Outlook On The Street
5 minute read
Trying to predict something like global economics can be complex, to say the least, which is partly why there’s always variation in forecasts. Having a rough idea of where the world might be headed won’t hurt; you’ll be better equipped to make the right investment decisions.
But with so many different perspectives out there, it’s no easy feat to sort through them all. So we went ahead and did the groundwork first. Here’s a quick overview and comparison of predictions from the top economists of various banks and financial institutions for 2024.
📊 Economic growth
When it comes to forecasts for global economic growth in 2024, the views are varied, and based on many different factors. To make things easier to digest, we’ve sorted them based on general optimism – whether they’re overall bullish, or bearish:
🐂 The Bulls
- Goldman Sachs kicks things off with a notably optimistic view on growth. Key drivers include a recovery in global manufacturing activity, and strong real household income growth (in other words, how much the average household earns, after accounting for inflation), particularly for the UK and the Eurozone. Plus, they’re sticking to their low 15% chance of a US recession. In summary, they’re expecting global GDP to grow by 2.7% in 2024, outperforming previous predictions in 2023.
- Morgan Stanley points out the upcoming balancing act between inflation and recession for 2024, which could weigh on growth. In particular, they’re projecting lower US growth, as consumer spending slows due to a cooling labour market and the effects of increased interest rates. But over in Asia, they’re highlighting Japan as a bright spot for growth. All in all, they’re predicting global GDP growth to come in at 2.8% in 2024.
- UBS predicts a scenario that’s a little tougher for the year ahead, a “new world” of uncertainties and challenges. Both the US and Eurozone are expected to experience slower growth, but they do see the US achieving a “soft-ish” landing in 2024 – in other words, avoiding a full-blown recession. For China, a new normal of lower, but potentially higher-quality growth is anticipated. Arriving at somewhat of a middle ground, UBS expects global growth to come in at 2.6% in 2024.
🐻 The Bears
- JP Morgan projects an even more challenging backdrop, and expects higher interest rates to start putting the brakes on global economic activity towards the end of the year. Chances of a global recession, as they’re putting it, are as high as 45% by the end of 2024. Overall, JP Morgan places GDP growth at 1.9-2.1% in the year.
- BlackRock foresees a period of slower growth and greater volatility. For the US, the focus remains navigating through the impact of inflation, while Europe's growth is expected to be influenced by energy supply challenges. For China, the report highlights the shift towards a lower, more sustainable growth model, similar to UBS’s analysis. BlackRock doesn’t place a particular number on growth for 2024, instead emphasising that investors focus on navigating a more volatile environment.
📉 Inflation and interest rates
A running theme over the past few years has been the ongoing battle between central banks and inflation, leading to some of the highest interest rates in recent memory. What does the new year bring? Is the market right in predicting early interest rate cuts, now that central banks seem to be on the right track? Here’s what the economists think:
🐂 The Bulls
- Goldman Sachs expects US core inflation to fall to 2-2.5% by end-2024, which is essentially the US Federal Reserve’s target. They believe most major central banks are likely done with rate hikes, with rate cuts starting by the second half of 2024. The exception: the Bank of Japan, which is expected to move away from yield curve control in 2024 – in other words, monetary policy for the country is likely to move in the other direction.
- Morgan Stanley suggests a more complex scenario for interest rates and inflation. They expect global inflation to gradually decrease, particularly in developed markets, but maintain that central banks will likely keep interest rates higher for longer, to ensure that inflation remains under control. Similar to Goldman Sachs, Morgan Stanley also anticipates rate cuts around mid-2024, if inflation continues to cool off.
- UBS takes more of a middle ground, anticipating slow and steady progress towards inflation targets, driven by factors like weaker consumer demand and slower wage growth. They believe a combination of lower growth and inflation will lead to interest rate cuts, but these cuts may vary in timing and magnitude across the central banks.
🐻 The Bears
- JP Morgan takes a more bearish tone, and anticipates that interest rates will remain higher for longer due to stubborn inflation. Their outlook for 2024 suggests that expectations of rate cuts in developed markets might be a little premature – inflation is expected to gradually decline, but at a slower pace than in 2023.
- BlackRock also paints a less optimistic outlook, and predicts both inflation and interest to remain higher in the year. They’re underlining the tough trade-offs in fighting inflation, which may result in policy rates settling above pre-pandemic levels. Overall, BlackRock suggests that economies and markets may have to adjust to this new environment, rather than relying on the typical cyclical strategies.
Staying invested in 2024
So that’s the big picture overview for the year ahead, in terms of economics at least. But keep in mind, there’s always the potential for surprises, good or bad.
In an uncertain environment – or for that matter, any environment – the best strategy for building long-term wealth is to stay invested at the risk level right for you. A portfolio that’s diversified across regions and industries (a shoutout goes to our General Investing portfolios) helps you achieve just that.
Check out StashAway’s 2024 Macro Outlook for our thoughts on what might be coming up for the next year. And stay tuned for Part 2 of our outlook that will deep dive into investing themes for 2024.