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    RESEARCH  |  3 POINT PERSPECTIVE  |  MACRO SHIFTS

    Q4 2024 Global Outlook: As goes America, so goes the world

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    Contributors: Ajay Rajadhyaksha & Amrut Nashikkar
    12 Sep 2024

    The US will dominate investor focus over the next couple of months, for both macroeconomic and political reasons, according to our Research analysts. A new global trade war, much larger than US-China in 2018, is the most obvious risk to markets.

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    1. A soft-ish landing is in sight for the West

    Once again, the US stands out against other major economies by the pace of its growth. China in particular has disappointed after a strong Q1. Falling tax revenues suggest declining profit margins and a weaker labour market, and the country is struggling with deflation. The euro area had a cyclical bounce in H1, but the recovery there still seems fragile.

    India and Japan have been growth success stories. But neither is large enough to be a decisive engine for the world economy.

    Fortunately, the US expansion is intact. Yes, the job market has slowed, and households’ excess savings have largely been used up. However, growth in payrolls is still solid and aggregate household incomes are rising. Fears of a new surge in inflation have faded, allowing the Fed to start cutting.

    All told, our Research analysts expect global growth of 2.9% next year, down slightly from our previous forecast in June.

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    Steady global growth has resulted in a solid macro backdrop, but there are concerning developments below the surface according to our Research analysts.

    2. The threat of trade frictions is looming large

    The US presidential election is just eight weeks away, with far-reaching implications for the world.

    A second Trump presidency would likely herald a new global trade war. The former president has promised blanket tariffs of 10% on all imports to the US and 60% tariffs on Chinese goods. Such measures would leave the world’s exporters with no room to hide; US duties on all imports would rise five-fold, even ignoring China-specific measures. Other countries would likely retaliate, with uncertain but serious effects on economies and markets.

    A Harris presidency, on the other hand, would likely lead to gridlock in Congress, with less dramatic trade policy changes. The presidential race is so close, and US politics so partisan, that markets will keep guessing until 5 November. The result could lead to starkly different winners and losers in global markets.

    3. Stocks are preferred over bonds

    From an asset allocation standpoint, our Research analysts recommend owning equities over fixed income. They argue that the recent rally in bonds doesn’t make much sense, given the solid economic outlook, and the stock pullback of the last few days has made valuations more attractive.

    Our analysts also think that the dollar will soon strengthen, as markets realise that the US remains key to the global expansion.

    However, the policy paths post-5 November are so binary that as elections near, many investors will probably move to the sidelines and wait for clarity.

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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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