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Global economies have had it rough the past few years. There was Covid, crypto didn’t do many favors throughout 2022 or 2023, multiple conflicts erupting and add on inflation with interest rate rises to follow. So where does that leave us for a Global Financial Market Outlook for 2024? 

Let’s take a look at a range of markets, offering a viewpoint to consider, then assess some of the big finance company outlook reports for 2024.  

Reports and Economic Outlooks 2024

Links to external reports and outlooks are below, followed by a synopsis and snapshot of the concepts they discuss.

Snapshot of Macquarie Outlook 2024

  • Global Growth Resilience: Global growth has proven more resilient than initially expected in the past year.

  • Inflation Trends: Inflation has been decreasing in most major economies.

  • Risk of Global Recession: The risk of a severe global recession has diminished, but there is an expectation of growth slowing in early 2024.

  • Impact of Monetary Policy: The full impact of the extended and variable lags associated with monetary policy is anticipated to be felt globally, contributing to a slowdown.

  • Central Bank Policy Response: Falling inflation provides central banks with the opportunity to ease policy gradually throughout the year.

  • Outlook for 2025: Despite the anticipated slowdown in early 2024, the expectation is for a global economic recovery in 2025.

  • Overall Message: Ric Deverell advises vigilance but suggests a less alarmed stance, indicating a relatively positive outlook for the global economy with the potential for recovery in 2025.

Summary of J.P. Morgan Global Market Outlook 2024

Global Economic Resilience in 2023:

  • Started with low global growth expectations and recession fears.
  • China’s reopening, U.S. and European fiscal stimuli, and other factors stabilized growth.
  • Despite challenges like interest rate hikes, wars, and crises, risk markets performed positively.

Concerns for 2024:

  • Anticipation of a global growth slowdown in early 2024 due to monetary policy lags.
  • Falling inflation expected to prompt central banks to ease policy gradually throughout the year.

Market Outlook and Caution:

  • P. Morgan expresses caution about the performance of risky assets and the broader macro outlook in the next 12 months.
  • Interest rate shocks and geopolitical developments are identified as challenges.
  • Market declines and volatility are anticipated in 2024 before potential easing of monetary conditions.

Equity Market Outlook:

  • S&P 500 faced challenges in 2022 but recovered in 2023.
  • Earnings growth outlook for 2024 is modest, with corporate margins facing headwinds.
  • P. Morgan estimates S&P 500 earnings growth of 2–3% in 2024, with a downside bias.

Global Economic Forecast:

  • Global growth exceeded expectations in 2023, supported by fiscal and commodity price shocks.
  • P. Morgan economists expect the global economy to avoid a near-term recession, but an end to the global expansion is likely by mid-2025.
  • Soft-landing optimism is rising, but concerns about a recession persist.

Outlook and Risks:

  • Growth poised to slow as positive shocks fade, with rising yields and tighter credit.
  • Limited inflation moderation due to supply damage and inflation psychology.
  • Business sector vulnerability, potential recession risks: 25% by H1 2024, 45% by H2 2024, and 60% by H1 2025.
  • Soft landing dependent on an inflation decline allowing mid-year monetary easing.

Inflation Expectations:

  • Inflation in 2024 is anticipated to continue its downtrend due to fading energy pressure and weaker labor markets.
  • Potential stickiness on the way down may pressure central banks to maintain higher interest rates for a longer duration.

Monetary Policy and Interest Rates:

  • Expectation of a steady and gradual easing cycle toward a neutral level of rates across developed markets (DMs) if the macro baseline of a soft landing unfolds.
  • Differentiation across jurisdictions in terms of the start date, pace, and terminal of rate cuts.
  • In the U.S., the Federal Open Market Committee (FOMC) is expected to start cutting rates in Q3 2024 at a pace of 25 basis points per meeting.

Commodity Markets Outlook:

  • Brent oil prices expected to remain largely flat in 2024 and decrease by 10% in 2025.
  • Solid supply-demand fundamentals, with oil demand rising by 1.6 million barrels per day in 2024.
  • OPEC+ likely to continue production constraints through Q1 2024.

Metals and Agriculture Market Outlook:

  • Gold and silver forecasted to outshine other metals, reaching new nominal highs in mid-2024.
  • Bullish outlook for agriculture markets, with sugar prices projected to average $0.30/lb and wheat prices at $6.33 per bushel in 2024.

Foreign Exchange (FX) Outlook:

  • FX market participants’ views on the macro outlook vary widely.
  • The U.S. dollar expected to remain at elevated levels with the potential for new highs if rate cuts materialize.
  • Euro and British pound face challenges, with the euro/dollar pair forecasted to hover between parity and 1.05, and sterling/dollar sinking to 1.18 in Q1 2024 before rising to 1.26 by December.

Emerging Markets (EM) Outlook:

  • EM outlook dominated by U.S. growth and monetary policy cycles.
  • Key themes in EM for 2024 include the U.S. economy, resolving cyclical uncertainty, and monitoring global macro trends.

Summary of CNN Report Outlook for 2024

Divergent S&P 500 Predictions

J.P. Morgan analysts predict a 11% decline to 4,200.

Capital Economics expects a 17% increase to 5,500.

Current S&P 500 level is approximately 4,740.

 

Rate Cut Expectations

The Federal Reserve signaled the possibility of three rate cuts in 2024.

Markets anticipate 6 to 7 rate cuts according to the CME FedWatch tool.

Some confusion exists about the market’s reaction to the Fed decision, with expectations exceeding the Fed’s indications.

Emphasis on Active Management

Analysts advise active management due to unusual volatility in stocks and bonds.

Broad market movements may not suffice, and investors should take a more deliberate approach to portfolio risk.

Active management is recommended by both J.P. Morgan and BlackRock.

Shift Away from Mega-Cap Tech

Mega-cap tech companies (the ‘Magnificent Seven’) may take a backseat in 2024.

Goldman Sachs expects cyclical sectors and small-cap stocks to perform well.

Morningstar economists highlight smaller-capitalization value stocks and sectors like banks and communication services.

 

Treasuries Outlook

US Treasuries are expected to remain volatile in 2024.

Wells Fargo Investment Institute anticipates declining yields early in the year and a subsequent rise as the recovery progresses.

Long-term bond yields are considered attractive, offering the highest real yields in decades.

Long-Term Treasuries as an Option

Commonwealth economists view long-term US Treasuries as a buy, provided inflation doesn’t unexpectedly accelerate.

The 10-year US Treasury yield minus core inflation turned positive in September 2023, making them an attractive option for investors seeking high-quality income.

Snapshot of Charles Schwab Global 2024 Outlook

U-Shaped Recovery

Anticipation of a gradual U-shaped global economic recovery in 2024.

The recovery is expected to be characterized by seemingly chaotic movements in economic data, policy rates, and earnings growth.

Investors are advised to step back to see the bigger picture and look beyond short-term noise and volatility.

 

Manufacturing Downturn and Recovery

Recap of the 2023 “cardboard box” recession, primarily affecting manufacturing and trade.

Extended duration of the manufacturing downturn, with the Global Manufacturing PMI marking 15 consecutive months below the growth threshold.

Expectation of a modest “cardboard box” recovery in 2024, potentially reversing relative growth trends between manufacturing and service-based economies.

 

Global Economic Trends

Shallow U-shaped recovery with growth rebounding only modestly and unevenly in 2024.

Potential heightened volatility in global stocks due to divergent movements in different parts of the global economy.

Patient investors may benefit from global stocks as markets discount better growth ahead supported by rate cuts among major central banks.

 

Labor Market and Inflation

Weakening labor market anticipated in 2024, with the strength in manufacturing likely to be offset by labor market challenges.

Lagged impact of rate hikes in 2023 expected to influence the labor market, leading to difficult economic conditions in some areas well into 2024.

Inflation and Monetary Policy

Sluggish European economy contributing to a decline in inflation, potentially leading to rate cuts by the European Central Bank in mid-2024.

Lagged impact of 2023 rate hikes yet to be fully felt, and higher rates may tighten household budgets in 2024.

Central Bank Policies

While policy rates may be at a peak in most economies, a rapid fall is not expected.

Quantitative tightening may continue, and the cumulative impact of rate hikes may weigh on global growth in the coming quarters.

The Bank of Japan (BOJ) could be an outlier, potentially raising policy rates in 2024, which could have global implications.

 

Global Market Dynamics

Geopolitical developments expected to remain a source of market volatility, although economic outlook may take precedence in 2024.

Market performance in 2024 may be more influenced by moves in the price-to-earnings ratio than earnings growth.

International stock valuations braced for a challenging 2024, but clarity around rate cuts and economic firming may lift valuations later in the year.

 

Investment Strategies

Quality companies with strong cash flow are favored, particularly those with low price-to-cash flow ratios.

A focus on “quality” stocks, particularly in the Financials and Energy sectors.

Potential outperformance of international stocks over mega-cap U.S. stocks, with broader market breadth supporting international equities.

 

Special Considerations

Emerging market stock performance likely linked to China and India.

Volatility expected in Chinese stocks in 2024.

AI-related stocks may benefit from increasing capital investment, but diversification is crucial given volatility in new technologies.

 

Overall Perspective

Investors may experience chaotic data points and market volatility in 2024, but a longer-term perspective may reveal a clearer picture of a new multi-year cycle getting underway.

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