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    RESEARCH  |  3 POINT PERSPECTIVE  |  MACRO SHIFTS

    Q1 2024 Global Outlook: Light turbulence, soft-ish landing

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    Contributors: Ajay Rajadhyaksha & Amrut Nashikkar
    16 Nov 2023

    Our Research analysts expect the world economy to slow in 2024, but in a fairly benign fashion, with low peak jobless rates and further declines in inflation in major economies. This is not an outright soft landing, but it is distinctly soft-ish.

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    1. The global economy has been surprisingly resilient

    Major economies are in better shape than most forecasts called for at the start of this year. And this is despite two wars on two continents, a bond sell-off for the ages, a crisis in the US banking sector, and very aggressive hiking cycles from central banks.

    Our Research analysts' forecast is for the US, euro area, and China to grow at 1.2%, 0.3% and 4.4%, respectively, in 2024. India will remain a stand-out once more, growing well above 6%. In China, the team sees a number of structural factors continuing to weigh on activity, including a lack of consumer confidence, changing demographics, and previous over-investment in housing. But they expect more policy support in the months ahead, including investment in infrastructure and high-end manufacturing, as well as monetary stimulus.

    All told, our analysts expect the global economy to expand by 2.6% next year. That is a slowdown from their estimate of 3% growth earlier this year. But this would represent a benign bottom for the business cycle.

    2. Inflation should fall – but not rapidly enough to spark big monetary-easing cycles

    Our Research analysts expect price pressures in the euro area to keep fading, as demand remains weak and the jobless rate rises. They see headline inflation at 2.3% entering 2025.

    US prices should be more intractable, with core personal consumption expenditures (PCE) inflation at 2.8% at the end of next year. The team thinks that the Federal Reserve will let the US economy run a little hot, in the hope that it eventually cools on its own. The price to be paid is in future rate cuts; our Research team forecasts just one from the Fed next year, in December.

    Our Research analysts wouldn’t be surprised, in fact, if the US central bank spends the entire year on the sidelines. Its decisions are not influenced by politics, of course. But in the context of what could be a very contentious Presidential election cycle, the central bank will probably prefer not to be part of a political conversation, one way or another.

    3. Stocks are more appealing than bonds at these levels

    For two straight quarters, our Research analysts have called for cash to outperform stocks and bonds. They now prefer global equities over core bond markets.

    Yes, stocks are not compellingly cheap, and consensus forecasts for double-digit earnings growth for the S&P500 in 2024 and 2025 seem optimistic to us in a world of lower nominal GDP growth. But the expectation is for stock markets to look through 2024’s slowdown, assuming our analysts are right about this being the bottom of the cycle.

    Meanwhile, the fiscal profiles of developed economies are worryingly poor. That includes the US, which is likely to run multi-trillion-dollar deficits for several years – at a time when major buyers of the last decade (the Fed and Asian economies running current account surpluses) have disappeared. Bonds just don’t seem attractive in this context.

    Our Research analysts expect global equities to eke out mid- to high-single digit returns in 2024, and outperform core fixed income.

     

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    About the experts

    Ajay Rajadhyaksha

    Global Chairman of Research

    Ajay Rajadhyaksha is Global Chairman of Research at Barclays, based in New York. He drives the global macro research and strategy effort, including economics, rates, FX, commodities, emerging markets, and asset allocation. Since joining Barclays in 2005, Ajay has held various positions, including Head of Macro Research, Co-Head of FICC Research and, before that, Head of US Fixed Income Research and US and European Securitised Research.

    Amrut Nashikkar

    Managing Director, Fixed Income Strategy

    Amrut Nashikkar is a Managing Director in the Fixed Income Strategy team at Barclays based in New York, covering interest rate derivatives with a focus on interest rate volatility and the Libor transition. Amrut joined Barclays in 2008 from Lehman Brothers, where he was an interest rate strategist. Prior to that, he taught at New York University, where he graduated with a PhD in finance. He also holds a management degree from the Indian Institute of Management, Ahmedabad, and an undergraduate degree in engineering from the Indian Institute of Technology, Kharagpur.

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