MacroVisor’s 2024 Global Outlook

2024 promises to be another interesting year, where we are likely to see more global central bank cuts than hikes, the potential for a new credit cycle to drive inflationary pressure earlier and from already higher prices, and geopolitical tensions that could escalate.

Emerging markets, particularly ex-China and within LatAm, could be poised to continue outperforming, while developed markets, and in particular the EU and UK, could stall and see some of their recent momentum give way to pressure as their central banks remain more resolute in their hiking.

In the US, the Fed’s apparent dovish pivot gave way to a significant bid across bonds, equities, and commodities, but bonds and commodities aren’t both likely to stay bid for long at the same time. Nevertheless, the perception of a new credit expansion cycle starting has boosted animal spirits and optimism that a ‘soft landing’ can be navigated.

Within China, the country continues to struggle with its slow-motion real estate crisis, a consumer that refuses to get off of the bench after years of episodic lockdowns breaking confidence, and foreign investors that are reluctant to allocate, with 2023 bringing the first year that FDI ever fell in China. We expect China’s struggles to continue until they force the PBoC to become more stimulative.

Asian EMs that are more dependent on China could continue to struggle until that pipeline of stimulus, one the markets have been waiting for since Nov ‘22, begins to open up.

Japan, content to play the part of the rebel, could be one of the very few developed country central banks that starts a new tightening cycle. But, their version of tightening is likely to look more like ZIRP + abandoning the 1% 10Y JGB reference point, rather than anything that looks too much like policy normalization.

Commodities, led by energy, are likely to have a decent bid in 2024, particularly as we get into the second half of the year. We’re also constructive on components of agriculture and precious metals.

This could give a boost to commodity currencies, like the AUD and CAD. We may also see the JPY outperform should BoJ truly move towards ZIRP and abandon the 1% reference level.

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