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Mid-Year Outlook 2024

Playing the Yield

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Xavier Baraton

The increasing influence of geopolitical factors on markets signals a shift to a new era with more volatile inflation and lower potential growth.

We explore:

Sticky but not stuck inflation

Sticky but not stuck inflation

Since the start of the year, inflation data has re-accelerated. Hotter inflation prints are due to the services sector, especially shelter costs. But leading indicators point to a resumption of disinflation trends through the rest of 2024.
Geopolitics key in a multi-polar world

Geopolitics key in a multi-polar world

Economic power is shifting to Asia and emerging markets. Tariffs and protectionist measures are on the rise. Economic statecraft has become the new normal. How can investors assess geopolitical risk in the current environment?
Emerging markets back in fashion

Emerging markets back in fashion

Emerging markets have been impressively resilient to the higher-for-longer interest rate environment, China growth challenges, and the stronger dollar in 2024. For investors, the new multi-polar world means that being granular in geographies will be more important.


 

The Global Mid-Year Outlook 2024 Webinar

Growth is broadening out and inflation is unsticking itself. Profits are recovering and investment markets look exuberant. But, in H2, investors will have to contend with some economic cooling in the US as well as election and geopolitical uncertainty. Where should investors have conviction now?
Joe Little, Xavier Baraton, and Joanna Munro review the global investment outlook and offer their expert conclusions.


More Experts’ Views at Mid-Year

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A ‘soft-ish landing’ remains our baseline scenario envisioning a moderate economic slowdown that avoids a severe recession. This means that inflation, which has been sticky, ‘unsticks’ itself. This is why we remain cautiously optimistic but think “playing the yield“ is the right strategy now.

A combination of cooling demand, weaker profits, modest rate cuts, and higher term premia could be a tricky situation for risk markets to navigate. We opt for a focus on fixed income and prioritise alternative sources of portfolio resilience.

We introduce three key themes to consider:

Real role for real assets
Economic shifts create a more volatile inflation environment in the medium term with profound implications for stock bond correlations.

Return of fixed income
High carry and ‘all-in’ yields point to better fixed income returns in the second half, amid rate cuts and disinflation. Duration could boost returns under any adverse growth scenario, or more aggressive policy pivot.

Emerging market leadership
Valuation discounts and broadening global growth create an opportunity for emerging markets to lead. While key issues are the direction of the US dollar and a Fed pivot, EMs are becoming less US-centric.


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