Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Chief Investment Strategist
Summary: The year 2023 was a year of extremes and divergences. The global economy was resilient against aggressive monetary policy hikes, but China faced serious structural growth issues. The US equity markets were pushed to new highs by the technology hype cycle, but the green transformation stocks were the biggest losing theme. The war in Ukraine continued, and a new hot spot emerged in the Middle East. While central bank policy was more or less synchronized, the Bank of Japan held on to its negative policy rates. 2024 will be a year of uncertainty. Investors will be wondering whether the US economy will fall into a recession, whether inflation and wages will prove sticky, and whether the global economy will reaccelerate. The war in Ukraine, the Middle East conflict, and elections in Taiwan, India, the US, and potentially the UK will all be major risk factors.
Just as one could not imagine equities to be crazier it did happen in 2023. It is always difficult to summarize a year in all its details but below are some of the key events to reflect on.
As 2023 is coming to an end investors will be wondering whether 2024 can once again surprise everyone. Consensus is increasingly betting on a mild recession in the US economy somewhere around mid-year. Under the assumption that consensus is always wrong this leads to two paths in 2024, 1) a hard landing scenario as high interest rates finally bite, or 2) a reacceleration of growth in the global economy. Growth remains ugly in Europe albeit stabilizing in a mild recession dynamic while the US economy remains resilient.
Next year will evolve around the following key topics: