Government

The market’s pricing of a soft landing means that geopolitical risks are becoming more, not less, relevant in 2024. US domestic divisions will invite challenges as foreign powers rightly fear that US policy will turn more hawkish after the election.

The statement from last week’s Central Economic Work Conference indicates that Chinese authorities are still not considering large-scale stimulus in 2024. Odds are that a full-fledged business cycle recovery in 2024 is unlikely. Chinese share prices remain vulnerable, and strengthening in the RMB will be short-lived.

The Republican Party’s odds of winning the 2024 election will benefit, if anything, from state courts’ attempts to exclude President Trump from primary or general election ballots. Higher odds of a change of ruling party will increase stock and bond market volatility.

Explore the eight main themes that will drive the returns of European assets in 2024.

Meager credit growth and shrinking real wages will keep Thai inflation very low in the coming months. The currency will get support from an improving current account surplus. Fixed-income investors should upgrade Thailand from neutral to overweight within EM domestic bond portfolios.

Global instability will continue in 2024 – whatever happens afterward. Slowing economies will exacerbate already high geopolitical risk and policy uncertainty stemming from the US election and foreign challenges to US leadership. Overweight government bonds, defensive sectors, the Americas versus other regions, aerospace/defense stocks, and cyber-security stocks.

We expect the US economy to slow and potentially downshift into a recession sometime in 2024, as tighter monetary policy weighs on consumers and businesses. In addition, (geo)political tensions may increase market volatility. The risk/return for US equities is unfavorable. We recommend that our clients reduce portfolio beta and increase allocations to defensives and quality growth.