Financial Markets: What Do Big Banks Expect for 2024?

So let’s explore the various scenarios outlined by some of the most influential commercial and investment banks for the upcoming year.

Barclays: Challenging Economic Conditions Are Still Expected in 2024

For Barclays, the outlook for 2024 suggests a landscape of uncertainty and market volatility. The global scenario appears as uncertain, if not more so, than it was at the close of 2022. The upcoming major elections in both the US and the UK in the next year add a layer of potential heightened uncertainties.

While the British bank doesn’t perceive a genuine risk of a recession akin to 2008’s in developed countries, the bank anticipates lower economic growth, which makes sense as central banks aimed to curb inflation by slowing down growth, thanks to higher interest rates and tighter credit conditions.

Barclays’ projections indicate global growth at 3% in 2023 and 2.4% in 2024, accompanied by a Consumer Price Index (CPI) of 3.9% in 2023 and 2.7% in 2024. Advanced economies, notably the United Kingdom, are expected to face challenges, with growth projected at 0.8% and 0.4% in 2024, following figures of 1.5% and 0.4% in 2023.

Goldman Sachs: Global Economic Growth Will Take Everyone by Surprise, Similar to What Happened in 2023

Analysts at Goldman Sachs suggest that investors can anticipate robust income growth in 2024, attributed to slowing inflation and a resilient job market. They also believe that the recent rapid rate hikes in various countries have already had their most significant impact on GDP growth, potentially providing support to the manufacturing industry to recover next year.

The global GDP is projected to reach 2.6% in 2024 and 2.7% in 2025, following 2.7% in 2023. Among developed nations, the United States is expected to outpace others, with a growth rate of 2.1% in 2024 and 1.9% in 2025, after 2.4% in 2023. In comparison, the Euro Area is forecasted to achieve 0.9% growth in 2024 and 1.5% in 2025, following 0.5% in 2023, while Japan is expected to experience 1.5% growth in 2024 and 1.1% in 2025, following 1.9% in 2023.

Why do Goldman Sachs analysts express such optimism regarding next year’s growth?

Their positive outlook revolves around anticipated growth in real disposable income, which is expected to provide ample support for consumption and GDP expansion. Furthermore, they believe that the most challenging aspects of rate hikes and tighter fiscal and monetary policies are now in the past. The manufacturing sector is also anticipated to rebound after dealing with increased stocks since 2022.

Additionally, the analysts’ research indicates that “major central banks are twice as likely to cut rates when there’s a risk to growth once inflation has normalized to sub-3% rates (relative to when inflation is above 5%).”

Morgan Stanley: Investors Should Be Aware of the Increased Risks to Companies’ Profitability in 2024

According to Morgan Stanley’s Global Investment Committee, corporate earnings are expected to deteriorate next year, or at least not experience a rapid re-acceleration as anticipated by many investors and analysts, particularly in the United States. Given the absence of a recession in 2023 and the resilience of the American economy in the face of significantly rising interest rates, there is a prevailing belief that the Federal Reserve’s efforts to combat inflation will not result in an economic downturn. Consequently, some Wall Street analysts anticipate a robust increase in company profits in 2024, with a projected 12% rise.

However, the bank believes that continued inflation and higher interest rates for longer may exert pressure on both consumer demand and corporate profit margins. Excessive inventory, increasing credit card debts, and diminishing consumer savings could exacerbate the decline in economic activity.

Other factors pose potential risks to the economic growth trajectory next year, including the potential repercussions of a government shutdown, the ongoing impact of rate hikes, elections in the US and UK, geopolitical tensions, and the deceleration of Chinese growth, among various other considerations.

Morgan Stanley suggests that investors may find fixed-income products more appealing, given their attractive yields, compared to stocks that could be overvalued and offer relatively lower potential rewards for the associated increased risk.

Be Prepared for 2024

Like any investor, the conclusion of the year provides an opportune moment to assess your portfolio, strategically consider closing losing positions for tax-related reasons, and think about the emerging investment themes that hold potential for future gains. This reflective process allows for a proactive approach to financial planning and positioning yourself to capitalize on evolving market opportunities in the coming year.

As usual, you should always carefully assess your risk appetite, financial objectives, and investment strategy before making any financial decisions, as these considerations serve as guiding principles to ensure that your choices align with your individual financial circumstances and long-term goals.

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