Market Outlook 2024 – Update Q2
by
Felix Ronner
This update provides an overview of the global economy for the second quarter of 2024, covering everything from ongoing geopolitical tensions and macroeconomic volatility to the growing trend of sustainable investments. Find out more about the current challenges and trends affecting the global economy and their impact on the quarter ahead.
Structural environment – polarization and challenges
The structural environment, marked by challenges like high debt levels, demographic shifts, and sluggish productivity growth, is fostering a trend toward low economic growth. High debt levels, among other factors, are contributing to growing inequality, which is fueling political polarization. This situation is compounded by the trend of renationalizing social and economic policies, persistent labor market shortages, and ongoing geopolitical conflicts, including the war in Ukraine and in the Middle East. Additionally, movements towards de-dollarization and the potential disengagement of BRICs countries from Western influence are becoming more apparent. These dynamics are escalating tensions between the “West” and the “Global South,” highlighting the complexity of the current global environment.
Economic outlook – volatility and growth prospects
Despite macroeconomic volatility, continued higher nominal growth and only a slow recovery in global growth in 2024, the probability of a recession in the US is low. Service inflation remains high despite falling general inflation figures. Accordingly, it can be assumed that inflation in Europe and the US will not fall below 2% for an extended period of time but will remain high on average over the next few years. In the longer term, however, investment activity is expected to increase, supporting growth, especially since the US Federal Reserve and the European Central Bank have declared the interest rate hiking cycle to be over. Initial rate cuts can be anticipated around mid-year.
Geopolitical risks and their effects
Geopolitical risks increased again in 2024 and are likely to remain elevated for a longer period. The Ukraine war and the conflict in the Middle East are serious factors here. However, the steady rise of parties critical of the EU/Euro in Europe and protectionist measures by the US government are also contributing to the global risk. Added to this is the renewed accentuation of the global trade war, which is primarily being fought between the US and China. In addition, fiscal policy remains mostly expansionary, except for fiscal tightening in Germany. As a result of this multitude of global risks and uncertainties, the trend towards deglobalization is intensifying, which in turn is weighing on global growth and the financial markets.
Current market environment – opportunities despite volatility
The market outlook, especially for equities, remains volatile and marked by significant setbacks, but the long-term view is fundamentally positive. This outlook is due to monetary policy tightening, which has resulted in valuations that are attractive from a long-term perspective. In contrast, yields on “safe” bonds, such as German Bonds and US Treasuries, are expected to move sideways over several years. This, in turn, creates a favorable long-term environment for precious metals. Additionally, across all asset classes, there is a noticeable shift towards sustainable investments and “Green Finance.”
You can download the detailed market outlook with an update for Q2 2024 here.