Our 2024 Outlook reflects key macro shifts including slower growth; structurally higher inflation and interest rates (even though inflation is cooling for now); deglobalization; and the diverging paths of local and regional economies and markets. These trends are part of an intensifying regime change — a break with the patterns we have witnessed since the global financial crisis. Navigating these shifts will be made more complex by two growing influences: the transition to lower-carbon energy sources and the adoption of generative artificial intelligence (AI) technologies.
Macro trends and transformation
Global growth is slowing, with a high chance that most countries will experience at least one quarter of contraction. Some may even face a technical recession, but ultimately these downturns should be mild, especially given real incomes and ongoing tightness in labor markets. As they look to strike a balance between inflation and growth, central banks have been keen to indicate that rates have now peaked. With monetary policy in flux and governments increasing their spending commitments amid reduced investor appetite for sovereign debt, we expect risk premia to experience a structurally upward trend.
Another key theme is deglobalization, which means that thinking locally may yield greater value. Many small, open economies could follow very different cyclical and policy paths from the US, the euro area, and other large economies.
A challenging geopolitical backdrop includes diverging policies as governments are focused on establishing both climate resilience and energy security, primarily by reducing dependence on fossil fuels. The race is on for energy-transition dominance and the massive market opportunities that go with it. Getting a head start matters because renewable energy has economies of scale. Today, China has a clear head start in the energy-transition race. This transition, along with geopolitical tensions, are leading to protectionism and inward-looking industrial policy; accelerated investment spending; and, due to the localization of supply chains, higher inflation.