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UBS 2024 Outlook: Global Growth To Weaken, Led By US And China

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In its 2024 outlook, UBS expects “global growth ½ pp weaker ... than 2023, mainly due to weaker growth in the US (a mild recession in Q2/Q3) and China (continued property drag and fading reopening effects)”.

  • Global outlook: “Our forecast would be 1pp below long run average growth, but we think potential growth has drifted lower and is now likely closer to 3%.”
  • Interest rates: Whilst markets are pricing little easing; “On average, G10 central banks are expected to cut by 80bp over the next three years, implying policy rates do not return to neutral or become accommodative", vs historical record of G10 ex-BoJ cutting 320bp over 15 months in easing cycles. They forecast "roughly 200bp easing in both EM and DM over the next 3 years.”
  • US: GDP Growth 1.1% 2024, 1.7% 2025. “The US economy is more late cycle than mid-cycle. If the economy reaccelerates strongly after just a mid-cycle slowdown, there is usually strong upside for risk assets. We think this is unlikely. [...] It’s not a given that we see a recession but returns do deteriorate strongly at this late stage in the cycle”
  • Eurozone: GDP Growth 0.6% 2024, 1.2% 2025. “[Chinese] imports of autos and capital goods should fall further, impacting these sectors in global markets, particularly Europe.”
  • Japan: GDP Growth 0.7% 2024, 1.0% 2025. Yen to appreciate sharply vs $ as US rates decline at a faster pace than elsewhere in developed markets.
  • China: GDP Growth 4.4% 2024, 4.6% 2025. "Continued property drag and fading reopening effects" Evidenced by imports holding up relatively well versus fixed investment, “China’s slowdown hasn’t fully impacted the global economy yet […] Economies most dependent on China are ignoring its slowdown”
  • Asset allocation: “We prefer bonds to equities in the US, equities to bonds in China” “$ weaker against G10 currencies. Stable against EM.” Meanwhile, “The EUR should see modest appreciation, helped by rates differentials and stronger portfolio flows, but hamstrung by still sub-par growth.”
  • Note: The UBS 2024 Outlook was published in November

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