Economic activity declined slightly on average, employment was roughly flat...
2024-02-07 53 英文报告下载
In the US and across large parts of the DM and EM world, inflation has declined to within striking distance of central bank targets without a major slowing in growth, a pick-up in unemployment or a recession. In that sense, the plane has landed softly. The question now is where in the vicinity of that target to park it. But with the largest part of the inflation surge now behind us, for the first time in a couple of years, the risks are becoming more symmetric—with the risk of inflation remaining sticky slightly above target to be weighed against the risk of weaker activity. While those risks and uncertainties remain, and at some point a recession will occur, under our modal economic forecasts recession is not imminent, and we see the odds as no higher than for a typical year, compared with consensus forecasts that are more downbeat. Instead, we envisage a period of global growth that is broadly around trend, and continued slow declines in inflation. The challenge for investors is that this modal view, while considerably more benign than consensus economic forecasts, is now quite well-reflected in market pricing. The prospect of higher rates for longer reflecting that benign view and higher neutral rates is also now broadly embedded in rate curves, as is the fact that we are likely to be living in a world where Dollar strength is not likely to be quickly or easily eroded. The resilience of risk and carry assets means that valuations are not especially compelling and point to modest positive returns under our central case for equities, credit and bonds, though our central case is more firmly positive for commodities (see Themes 7 and 8). The larger asset market asymmetries and opportunities are therefore in the tails of the distribution around our modal view. For example, on the downside tail, the value of bonds as a recession hedge has been rising (see Theme 6), and on the upside tail where inflation normalises faster and opens up space for US rate cuts, equities and EM assets have room to deliver broad-based outperformance (see Theme 9). Overall, this distribution of risks and market pricing suggests that a more balanced mix of assets should probably replace the focus on cash that dominated portfolios in 2023 (see Theme 10), especially since each asset class offers protection against at least one key tail risk.