The global economy will continue to suffer through uncertainty and sub-trend growth in 2024, according to State Street’s 2024 Global Market Outlook.

The firm noted that 2023 was plagued with persistent inflation, muted growth and tightening of monetary policy from central banks and said this year investors can expect more uncertainty as the impact of high interest rates moves through the global economy.

The firm believes that based on the indicators, the economy is heading for a soft landing, but Matt Nest, global head of Active Fixed Income, said two factors indicate that could not be the case. 

“If you look at any of the spot data it squarely points to soft landing,” he said. “If you look at the historical track record of such cycles, that would call all this into question.”

The second indication pertains to the traditional forward-looking indicators, such as manufacturing indices or the yield curve, which point to a market contraction, according to Nest.

“That’s where the balance lies,” he said. “Do you trust the spot data, do you trust history or do you trust the forward-looking data?”

The chances of a soft landing are precarious as some central banks, such as the Federal Reserve, may look to lower rates, the report said. If that happens, Nest cautioned it could lead to more inflation in the coming year. 

Geopolitical events could also impact inflation as well, according to the report. It noted that territorial conflicts such as the wars in the Middle East and Ukraine are becoming more commonplace and could impact prices.

“We consider they pose enough risk to be more inflationary, thereby derailing the disinflation trajectory, and disrupting terms of trade for large economies,” the report said. “In short, geopolitical events could deliver smaller stagflationary impulses.”

Oil prices could also be impacted as a major shift in the energy markets has occurred as the U.S. became a net exporter of energy and stopped being a net consumer, the report said.

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