US 2024 Market Outlook

2024 Market Outlook – Navigating transitions. Seizing opportunities.


FALLING INFLATION AND A TURNING POINT FOR BONDS? --------------- Inflation should continue to trend downwards in 2024 barring a commodity price shock. The bar for further rate hikes appears high and the accumulated drag of the rate hikes should eventually slow the US labour market and allow the Federal Reserve (Fed) to start cutting rates. Wage growth needs to fall convincingly for core inflation to start decreasing meaningfully. Historically it has taken three to seven quarters for higher interest rates to slow US wage growth and the labour market. Average inflation in Asia is back at target levels in most economies. China’s economic weakness is likely to contribute to further disinflationary pressures in the region. Nevertheless, Asian central banks’ easing prospects are likely to be influenced by the Fed’s timetable in 2024. Recent events in the Middle East are a potential risk to oil prices. A sustained run-up in oil prices would keep inflation high, challenge central banks and be an adverse shock to the global

Manufacturing investment will likely pick up, as re-stocking takes place in both the US and China. The property sector, on the other hand, will probably stay weak as new housing starts and home prices remain flat. According to the Asian Development Bank, Asia is projected to grow 4.8% in 2024, marginally above the 4.7% expected in 2023. A slower China and recessions in the DMs are likely to weigh on the export-dependent economies within Asia, while countries with large domestic consumption may be more resilient. ASEAN, as well as India and Vietnam should continue to benefit from the ongoing global supply chain diversification. Risk assets such as global equities are likely to move lower in the medium term on the back of deteriorating global growth. We are constructive on Asia ex Japan equities as the global slowdown is concentrated in the developed economies. More supportive policies by the Chinese government are helping to stabilise the Chinese economy, which is positive for the region. Asian equities also offer better value with a forward price to earnings ratio at 11.7x compared to 18.4x in the US 1 .

Falling US wage growth is key to Fed policy












Average Hourly Earnings YoY% (All Employee) Employment Cost Index YoY% (Production Employee)

Source: LSEG Datastream, 4 October 2023.

1 LSEG Datastream, 7 November 2023. IBES 12-month forward price to earnings ratio.

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