Barclays 2024 Outlook: Soft-ish Landing, Equities Over Bonds

In its 2024 outlook, Barclays expects “the world economy to slow in 2024, but in a fairly benign fashion, with low peak jobless rates and further declines in inflation in the major economies. This is not an outright soft landing, but it is distinctly soft-ish. Stocks are more appealing than bonds at these levels."

• Global outlook: 3% global growth this year, and 2.6% in 2024. “We don't see an outright soft landing - that would need a glide path to 2% inflation, and with no job losses. But it is a quite benign trough for a world economy that has been buffeted by one crisis after another in recent years, and has still emerged in surprisingly decent shape.”
• US: Slowdown likely to be mild: “one of the rare instances where the unemployment rate does rise a fair bit, but the economy avoids a serious recession”. For the Fed, while lower inflation means higher real rates and opens the door to cuts, “a series of new rate hikes next year cannot be ruled out, especially if inflation expectations move up”. Only one rate cut is expected “and wouldn’t be surprised if the central bank spends the entire year on the sidelines.”
• Eurozone: Growth outlook “mediocre but not terrible”, with inflation declining as demand remains weak, with headline HICP at 2.3% entering 2025.
• Japan: Inflation developments to finally bring the BoJ to exit its YCC and NIRP policies in April.
• China: Growth likely to disappoint consensus “but we don’t see a financial crisis brewing”... “Expect more policy support in the months ahead, including more investment in infrastructure and high-end manufacturing, as well as another 20bp in policy rate cuts and 75bp in the RRR."
• Geopolitics: Limited impact…."Unless the Middle East war broadens and drags in more actors (such as Iran or its proxies) financial markets are likely to largely ignore it, as they have done so far. The global economic impact of the Russia-Ukraine war (now almost two years old) also seems manageable"
• Asset allocation: “Equities to eke out high single-digit returns in 2024 and outperform core fixed income…long local rates in emerging markets where central banks were conservative... A stronger-for-longer dollar in an environment of global downside risks.”
• Note: The Barclays 2024 Outlook is dated Nov 16