“Last year, double-digit inflation took center stage as the main disrupter of the global economy. While it’s likely to remain a factor, new events are poised to cause financial markets headaches in 2024.”
Those are the words of Sam Murray, business development manager at Privalgo. Sam’s picked out some key topics for businesses to focus on this year, including global growth and interest rates, war in Ukraine and the Middle East, and UK and US elections.
Dive into Sam’s expert analysis to ensure you’re prepared for what the next 12 months have in store.
Growth concerns to persist
The recession that many investors believed would happen in 2023 has still not occurred. Does that mean it will happen in 2024? Potentially. However, a theme that most agree on is a period of lower, more modest growth. The current median forecast is for global gross domestic product (GDP) to expand by 2.6% next year. Yet, with several GDP forecasts slashed towards the end of last year, there is scepticism amongst commentators of the 2.6% growth figure being attained.
Higher rates for longer?
Despite the signs that inflationary pressures are moderating, it would be unwise for central banks to declare an early victory on inflation. With inflation having been above target for much of the last three years, decision makers may look to delay rate cuts as long as possible to negate the risk of restoking the inflation problem they worked so hard to eliminate. Markets were initially pricing in a cut to UK interest rates at the end of Q2 2024, the consensus is that this is now likely to occur in the latter two quarters of the year.
Volatility to continue
Higher rates and greater volatility define the new regime’ was the opening sentence to Blackrock’s 2024 global outlook. Markets have been flip-flopping between hopes for a soft economic landing and fears of further hikes to interest rates that can contribute to recessionary pressures . This has certainly led to some of the volatility we have seen in bond, stock and foreign exchange markets over the last twelve months. Although inflation and interest rates are showing signs of cooling, volatility is unlikely subside overnight.
The UK general election has not yet been scheduled but must be called before 17 December 2024. Sunak’s Conservative Party are significantly trailing Labour in the latest polls and most observers agree that he’s going to push out the next general election as far as he’s allowed, likely until autumn 2024. With the Budget scheduled to take place in March, it would not be a surprise if further fiscal stimulus is introduced in a bid to win voters.
The US political landscape is arguably even more unclear. Despite recent court rulings, a rematch between Biden and Trump currently looks most likely to take place, with the election set for November 2024. At this stage, it is too early to speculate as to which party will be elected, one thing is clear though, the political uncertainty in the country will ramp up as we close in on the final quarter of the year and will undoubtedly filter into broader markets.
The Russian invasion of Ukraine and escalation of tensions in The Middle East are still prevalent as we move into 2024. While it is impossible to predict how the conflicts in these regions will evolve, they do raise the level of uncertainty in global markets. Oil prices and safe-haven assets (such as gold and USD) were just two of the areas affected by these events in the last twelve months and are likely to be closely correlated in the next year.