7 themes for the global outlook in 2024

The global economic landscape is in flux. The sharpest monetary policy tightening in four decades slowed growth less than expected, but long and variable lags between policy changes and economic impact suggest recession risk remains pronounced.

In recent decades, the United States and China have been the two primary economic locomotives. In 2023, US growth surprised on the upside as consumers depleted much of the over $2.25 trillion of excess savings accumulated during the pandemic. Going forward, consumers will increasingly rely on wage gains and, to a lesser degree, Federal Reserve easing to support spending.

Growth in China faltered as the housing sector, which comprises nearly a quarter of GDP, fell into crisis. This led to a raft of stimulative measures announced by various levels of government, which should lift prospects next year.

Stagflation plagued the Eurozone through much of 2023, but conditions are likely to improve in 2024 as disinflation progresses. Unfortunately, recession appears likely, with 3Q23 data showing a 0.1% contraction in Eurozone real GDP, with Germany and other industrially intensive economies weighing on the region’s output, while more service-driven economies outperform.

Japan is the outlier as the only developed economy maintaining negative interest rates. I expect Japan to continue growing above potential through 2024 as the Bank of Japan (BoJ) seeks to avoid snatching defeat from the jaws of victory in its battle against deflation.

The highest geopolitical risk in decades has compounded economic uncertainty. Between the ongoing war in Ukraine, a humanitarian disaster in the Middle East, and rising tensions between China and the West, executives and investors can no longer assume a placid geopolitical backdrop when making decisions.

While predicting the course of any single geopolitical crisis is fraught, what is clear is that the global trajectory is toward more frequent conflicts of increasing consequence. Navigating the evolving - at times treacherous - geopolitical landscape will likely require access to deep wells of expertise, as geopolitical issues that could have been ignored in the past now stand to directly impact companies’ supply chains and customer bases.

Below are seven themes that I believe will play out in 2024: 

• Rate hikes likely shifting to cuts as inflation falls to 2%.
• The Fed engineering a “soft landing”, thus avoiding a US recession.
• China sentiment improving despite the ongoing housing overhang.
• The Eurozone and UK teetering on the brink of recession as sticky inflation precludes easing.
• Japan exiting yield curve control and negative interest rates.
• The Ukraine war dragging on and Western tensions with China ratcheting higher.
• US elections becoming the focal point as a determinant of the geopolitical trajectory.

These themes are explored in more detail in the pdf below containing my Global Outlook for 2024.