A world in tension. Question marks over the further development of the US economy. Here are the scenarios

Investment banks, asset managers and equity analysts around the world are divided on how the US economy will fare in 2024. Some say the US economy will grow at a pace similar to last year despite the challenges; others are convinced that the US economy will enter a long-heralded recession and take the whole world down with it.

While last year all forecasters agreed that the US would experience a long economic recession, this year the expectations are different. Also because last year’s estimates were not fulfilled and the world’s largest economy grew by 5.2% in the third quarter of this year. Vague forecasts have created a wide range of projections for the development of US interest rates, which significantly affect global assets.

Participants in the world market are therefore preparing for a turbulent period when it is not clear what will be the development of US inflation and interest rates determined by the Federal Reserve System. It is not yet possible to estimate whether there will be an economic downturn in the US, which may trigger a rate cut and a weakening of the dollar. Trading data shows that investors are increasingly interested in protecting their portfolios against future increased volatility in stock markets.

Amundi, Europe’s largest asset manager, now, according to Reuters, he expects a recession in the US in the first half of 2024, meaning the group has a negative stance on the dollar and a focus on emerging market assets. On the foreign exchange front, they said the Japanese yen should be a “bright spot” in the market as the Bank of Japan is expected to finally abandon its ultra-loose monetary policy.

However, Morgan Stanley does not foresee a recession and expects the Fed to keep rates high next year. Forecasters are also divided on U.S. stocks, which drive global stock markets. Some are still very committed to the idea of ​​a recession, believing that if it hasn’t happened this year, it must happen next year.

Deutsche Bank predicts a mild recession in the US in the first half of 2024 and a whopping 175 basis points cut in interest rates. JP Morgan sees a recession as possible, while Goldman Sachs sees only a limited risk of recession. Equity analyst estimates are currently the most mixed since the covid-19 pandemic, according to Blackrock Investment Institute (BII).

Most economic forecasters agree that the global inflation wave is over. But investors also disagree on whether that means a dramatic rate cut, which typically pushes up bond prices as yields fall. Bond giant PIMCO estimates the probability of a US recession in 2024 at 50%.

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