With the new year fast approaching,  we share our thoughts for the year ahead.

2023 Review

The much talked about 2023 recession didn’t materialise, with the UK delivering an estimated growth figure of 0.5% and much stronger performance in the US of 2.4% , fuelled by strong consumer spending supported by pandemic savings and strong wage growth.

US Inflation fell significantly from the 2022 peak of 9% to around 3% at the end of 2023. The labour market in the US is now cooling with a large fall in the number of openings per worker.

The markets survived the three US bank failures and delivered an impressive AI tech rally among the magnificent 7 stocks as well as a welcome Santa rally in December for both equites and bonds.

2024 Outlook

The global economy is expected to slow in 2024 as the fiscal lag of higher interest rates begins to bite. we could see an eventful first two quarters next year.

Elevated interest rates are finally causing consumer spending in the US to slow which in turn is expected to see inflation continue to fall to just above the 2% target by the end of 2024.

The Fed has signalled it hopes to make three interest rate cuts in 2024, possibly 0.25% each time, although we don’t expect this to start until at least the second half. At the time of writing, the UK is saying it expects rates to stay higher for longer to combat stubbornly higher than target inflation. This interest rate difference alone could see the GBP : USD rate rising to above 1.30 next year.

The second half of the year is expected to be brighter as the world economy begins to grow again.

GDP growth Forecast

                                2024 Forecast                    2023 Estimate

US                          1.5%                                      2.4%

EU                          0.9%                                      0.6%

UK                          0.7%                                      0.5%

Uncertainties

There are always risks, but the current events that could derail the current outlook are,

1. Uncertainties over the US Presidential Election
2. Escalations in the war in Israel and Ukraine
3. Ongoing US-China Relations
4. Risks of disruption to major world shipping routes
5. Rising consumer debt
6. Rise in corporate failures and insolvencies

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