Escalating tensions in the Middle East, intense chip war between the US and China, slowdown in the Eurozone, and a faltering Chinese economy—a lot is transpiring across the world. How will this work out for financial markets? Market experts share their global market outlook for 2024.

Global Macroeconomics

Most asset managers foresee cyclical shifts in the world economy and believe that the financial markets could bring in surprises in 2024. 

“The slowdown we are all expecting keeps being put off, but I don’t expect it to be overly severe when it finally occurs. The relative risks of incrementally higher or lower inflation or a milder or deeper recession are at least known risks. We think the bigger dangers in 2024 will be geopolitical, which have more potential to throw expectations off track. This includes escalation in the Middle East and increasing tensions between the US and China,” says William Davies, Global Chief Investment Officer at Columbia Threadneedle.

According to Salman Ahmed, Global Head of Macro and Strategic Asset Allocation at Fidelity International, “The (global) economy continues to deliver surprises, but we are confident of one thing: if the US and other developed world interest rates have not peaked already, then they will do so soon. And against this backdrop, growth will stall.”

“Resilience driven by fiscally supported consumers and companies has been the biggest surprise of 2023, but barring something extraordinary, next year we expect to see the economy finally turn lower,” adds Ahmed. 

Echoing this sentiment, Eastspring Investments believes that the global markets could see some of its resilience fading away in 2024. “Global central banks are likely to be at or close to the end of their rate hiking cycles as inflation pressures ease, although they would be wary of declaring victory over price rises too quickly,” contends the asset manager. 

Global Equities Outlook

As for equities, experts advise investors to be cautious and selective in 2024 amid growing macroeconomic uncertainty.

Kristin Lemkau, CEO of J.P. Morgan Wealth Management is upbeat on the prospects of equities for the next year. “In 2024, equities offer the potential for meaningful gains. Even as economic growth slows amid higher rates, we think large-cap equity earnings growth should accelerate, and that could propel stock markets higher over the next year,” writes Lemkau.

Dane Smith, Head of North American Investment Strategy & Research at State Street Global Advisors, recommends, “Companies with more resilient earnings streams and stronger balance sheets are better positioned to withstand the pressures of still-tight monetary policy, rising debt, and a deterioration of consumer spending. In short, we favour quality stocks, namely those assets which display these compelling characteristics.”

Separately, Amundi highlights the prospective sectors and themes for 2024. “Entering 2024, stay defensive and focused on dividend sustainability, quality, and low volatility. Favour value in the US and Japan. When the Fed starts cutting rates, turn to more cyclical markets and sectors, such as Europe, Emerging Markets, and small caps. Themes to watch in equity will be the energy transition, healthcare, and artificial intelligence,” advises the asset manager. 

Global Market Outlook for Bonds

Against the backdrop of rising interest rates, several analysts believe that government and investment-grade bonds will play a critical role in a diversified portfolio. “We prefer fixed income to equities in our global strategy for 2024,” affirms Vincent Heaney, Head of Investment Editorial at UBS Wealth Management. 

“We like opportunities in high-quality government and investment grade bonds. Our preferred duration segment within high-quality debt is the 1–10-year range, with a preference for the 5-year point in US government debt. Investors can consider a 5yr/10yr duration-neutral US steepener to hedge against risks of loose US fiscal policy and tight US monetary policy in 2024,” states Heaney. 

Along these lines, Andrew Pease, Chief Investment Strategist at Russell Investments, opines, “With yields trading well in excess of expected inflation, we see government bond valuations as attractive in the U.S., the UK, Canada, Germany, and Australia.”

“Our fixed income strategy team sees particularly good value in the five-year segment of the yield curve and the potential for the curve to re-steepen if more aggressive rate cuts are delivered in 2024 and 2025,” asserts Pease.

Besides, PIMCO strongly favours fixed income in multi-asset portfolios. “Given current valuations and an outlook for challenging economic growth and diminishing inflation, we believe bonds have rarely appeared more compelling than equities,” emphasises Erin Browne, Portfolio Manager, Multi-Asset Strategies at PIMCO.

“Medium-term US duration is particularly appealing. We also see attractive opportunities in Australia, Canada, the UK, and Europe,” he specifies. The asset manager also favours mortgage-backed assets and select securitised bonds.