Political dangers and geopolitical risks in 2024
The past few years have taught us to expect the unexpected, and the year 2024 is likely to be no different. Geopolitical issues and political dangers are poised to once again rock the global markets. The ongoing conflicts in the Middle East and the Russia-Ukraine war are expected to escalate, creating further instability. Disruptions to shipping in the Red Sea from Houthi rebel attacks are already pushing up transport costs, further adding to inflation pressures. Additionally, tensions between Beijing and Washington during the US election campaign could escalate, further heightening geopolitical risks. The packed election calendar in 2024, with crucial elections in major economies, is expected to add to economic uncertainty and lead to a wait-and-see approach by governments, households, and companies.
The outlook for stock markets in 2024: A new ‘roaring 20s’?
The year 2023 ended with a strong rally in risk assets, and many analysts expect this trend to continue in 2024. The S&P 500, which ended 2023 just short of an all-time high, is predicted to climb further. Some experts even suggest that the markets could see a “roaring 20s” rally akin to the one seen 100 years ago. Consumers are expected to continue spending as they enjoy job security, and US corporations’ ability to generate cash flow is anticipated to support the US economy. However, not all experts share this optimistic view, with some predicting that the S&P 500 will end 2024 roughly where it started. Quality stocks, including the US tech sector, are considered to offer particular investment opportunities.
Recession fears and sluggish growth forecast for the UK in 2024
The UK is facing a challenging economic outlook in 2024. Unemployment is expected to rise, pushing the jobless rate to 5%. Inflation is predicted to decrease but remain above the Bank of England’s target of 2%. Fears of a recession in the UK have grown after updated GDP data showed a small contraction in the third quarter of 2023. Morgan Stanley forecasts that the UK will experience a technical recession in 2024, with at least two consecutive quarters of contraction. The UK’s sluggish economic performance and the uncertainties surrounding Brexit have contributed to UK companies being undervalued compared to their international rivals.
Interest rate predictions for major central banks in 2024
The market is generally betting against the idea of “higher-for-longer” interest rates, with expectations that major central banks will cut rates in 2024. Both the US Federal Reserve and the European Central Bank are expected to reduce borrowing costs multiple times throughout the year. The Federal Reserve is predicted to cut rates to a range of 3.75%-4% by the end of 2024. The European Central Bank has also signaled that further interest rate hikes are off the table due to a fall in inflation. Market analysts argue that lower interest rates are justified by inflation reaching its target and subdued growth.
Global economic outlook for 2024: Resilience but sluggish growth
The global economy is expected to experience sluggish growth in 2024. Oxford Economics predicts lackluster growth due to factors such as high interest rates and government spending squeezes. Morgan Stanley anticipates a slowdown in global growth to 2.8% in 2024, down from an estimated 3% in 2023. In Europe, barely positive growth of 0.5% is projected for 2024, reflecting the continued effects of energy supply shocks and tight monetary policy. China’s economic performance is also expected to weigh on growth in emerging markets. Some experts even predict a protracted debt-deflation cycle in China, triggering widespread defaults in the housing sector and spilling over to other economies.
Analyst comment
1) Political dangers and geopolitical risks in 2024: Negative news. The global markets are likely to face further instability due to escalating conflicts in the Middle East and the Russia-Ukraine war, as well as tensions between Beijing and Washington. Economic uncertainty is expected to lead to a wait-and-see approach by governments, households, and companies.
2) The outlook for stock markets in 2024: A new ‘roaring 20s’?: Positive news. Many analysts expect a strong rally in risk assets to continue in 2024, with the S&P 500 predicted to climb further. Consumers’ spending and US corporations’ cash flow are anticipated to support the US economy. However, some experts have a more cautious view.
3) Recession fears and sluggish growth forecast for the UK in 2024: Negative news. The UK is expected to face a challenging economic outlook, with rising unemployment, inflation above target, and fears of a recession. The uncertainties surrounding Brexit have contributed to undervalued UK companies.
4) Interest rate predictions for major central banks in 2024: Neutral news. The market expects major central banks to cut interest rates in 2024, with the US Federal Reserve and the European Central Bank predicted to do so multiple times. Lower interest rates are justified by inflation reaching its target and subdued growth.
5) Global economic outlook for 2024: Resilience but sluggish growth: Negative news. The global economy is expected to experience sluggish growth in 2024, with factors such as high interest rates and government spending squeezes contributing to lackluster growth. Europe and China’s economic performance are predicted to weigh on overall global growth. There are concerns of a protracted debt-deflation cycle in China.
