January 2024 - Highlights

2024 Outlook

This time last year 85% of economists predicted we'd be in a recession by now (Financial Times, 2024). While we're not yet out of the woods we can certainly be grateful for having beaten the odds. Indeed last year's initial low expectations for global growth and elevated fears of recession were quelled as a combination of China's reopening, large fiscal stimulus in the US and Europe, and residual strength of US consumers stabilised growth. Furthermore risk markets such as AI, luxury goods, weight-loss drugs, expectations of Fed rate cuts and cryptocurrency sparked market optimism.

However, there are a number of additional factors to take into consideration.

China - how will 'de-risking' affect green transition progress globally?

There is a notable scenario of deflation as real GDP growth stands at 5% with nominal GDP growth being slower at 3.5%. While these are respectable numbers growth is slower than the pre-COVID period. While the property sector slowed further (J.P. Morgan, 2023) there has been a 30% year-on-year increase in the exports of electric vehicles (EVs), solar energy products, and lithium batteries in 2023, reflecting a growing demand for sustainable technologies. European leaders, influenced by a record trade surplus in 2022, the war in Ukraine, and the pandemic, have decided to diversify supply chain sources away from China. Similarly, the US has implemented restrictions on access to advanced semiconductors and increased scrutiny on investments to and from China, indicating a broader trend of 'de-risking' from China. Both the EU and the US are engaging in strategic measures, such as the EU's anti-subsidy investigation of Chinese EVs and Biden's signing of the Inflation Reduction Act, aimed at strengthening their positions in renewable energy manufacturing supply chains. These developments collectively paint a picture of a complex economic environment influenced by deflation, trade dynamics, and a heightened focus on sustainability and supply chain resilience, with geopolitical factors playing a significant role in shaping strategic decisions (Financial Times, 2024).

US elections - how might they sway policy?

If Donald Trump is elected, he could end up being more moderate than his rhetoric suggests, while Joe Biden’s second term could be more business-friendly than his first elections. Or not. Trump raised tariffs them and Biden decided to keep them. Immigration policies in Trump's first term became stricter however, Biden didn't quite welcome them with open arms either. Will isolationism be beneficial to the US? Both oppose reducing projected spending on Social Security and Medicare programmes: most responsible for the nation's debt trajectory (Financial Times, 2024). With a value of over $34t in national debt the US Treasury worries of an 'unsustainable fiscal path' in the long run (The Economic Times, 2024). How and when will the impacts on this begin showing?

Inflation - predictions?

US Inflation is expected to further recede reaching the Fed's 2% target by the end of the year (Bloomberg, 2024). The Eurozone narrowly avoided a recession at the end of last year (The Guardian, 2024). At the end of last year, the ECB adjusted its 2024 forecast downwards, now at 2.7%, while maintaining its 2025 forecast at 2.1% (Eurostat, 2024). The BoE is expected to hold interest rates at 5.25% despite acknowledging rapid progress in reducing inflation, and analysts predict it won't begin cutting rates yet (Financial Times, 2024).