TD 2024 Outlook: Won't Get Fooled Again

TD identifies the two biggest questions facing the global economy in 2024 as 1) will there be a US recession and 2) where is Chinese growth headed - they see a weak US performance with a recession, and stable Chinese growth.

• Global: 2.4% GDP growth. "While Europe and Canada may already be in recession, we see a U.S. recession by mid-2024 and relatively stable Chinese growth around 5%. Global demand will dip in 2024. Fiscal policy remains a dominant force in the U.S. and China. Any changes to policy will have important implications for growth... Inflation will decelerate towards target."
• US: 0.7% GDP growth. Mild recession beginning around mid-year, with higher real rates dragging, government spending normalizing, tighter financial conditions, layoffs rising, falling stock prices.
• Eurozone: 0.3% GDP growth: " waffling through the middle, with tepid growth below 2023 rates expected...recent data suggests that downside risks are building, and we expect two very mild quarters of negative growth in 2023H2, with little improvement until 2024H2."
• Japan: BoJ to exit NIRP in April, hike in Oct
• China: 5.1% GDP growth: "At best, we can look at the Chinese economy as on life support, with large fiscal stimulus keeping growth just above 5% in 2023 and 2024...this is largely a story of reduced tail risks, rather than classic Chinese fiscal stimulus bleeding into boost global growth in any massive way."
• Rates: "the rates diversification trade is simply the pivot from "Buy Duration" to "The Year of the Bull Steepener" once front-end yield expectations begin to collapse. With a US-centric story, that means US outperformance in duration and steepening."
• FX: "USD is losing its edge"; notably Short USDJPY.
• Note: TD's Outlook was published on Nov 13