As we head into 2024, the global economy can outperform low consensus expectations. Regional divergences are likely and will create opportunities – specifically in the US, which could outperform given robust real income growth. Also, Japan will likely benefit from a looser monetary and fiscal backdrop relative to other developed economies. Disinflation is likely to continue, albeit at a slower pace than in 2023, as pandemic distortions continue to normalise and shelter inflation continues to slow.
The implications of this for multi-asset portfolios have been mixed, albeit leaning towards the positive. Equities have performed well, as better than expected growth fuelled expectations that company performance would improve. In contrast, government bond performance has been more muted, given resilient growth led central banks to increase interest rates more than was anticipated at the start of the year.