Robeco publishes its outlook for 2024 – Goldilocks: Exit stage right

  • Interest rates expected to stay high (for an extended period), further steepening the yield curve

  • Increased impact expected for sovereigns, corporates and households of high real interest

  • Equity markets impacted by declining excess liquidity, geopolitical risks and high interest rates

  • Climate remains top focus for shareholders; tax transparency and AI gain interest

Rotterdam 23 November 2023 — Robeco’s one-year outlook anticipates a significant shift in the global economic landscape in 2024. The Goldilocks era is drawing to a close. Decreased consumer spending and reduced corporate investment likely reflect a deepening slowdown of the G7 business cycle. The impact of continuing high rates may trigger unemployment rising to 1-2% toward 2025. Corporate and housing balance sheets are still robust, preventing a classic recession so far. China, on the other hand, is grappling with the risk of outright deflation. A continuing downward trend in home sales and house prices in China could hinder a sustained domestic consumption recovery.

Peter van der Welle, Multi-Asset Strategist at Robeco: “Contrary to market expectations, the US economy has shown surprising resilience in 2023, characterized by low unemployment and disinflation. This phenomenon, labeled ‘immaculate disinflation’, extended to the Eurozone as well. Yet, the last mile for central banks will prove the toughest. Further disinflation efforts will come at a higher cost as the trade-off between unemployment and inflation steepens at lower levels of inflation. The effective immunization of sovereigns, corporates and households against a high real interest rate regime is set to fade. The current consensus narrative suggests a soft landing, where inflation is controlled without significantly increasing unemployment. But we believe this is overly optimistic.”

Other factors of impact
The geopolitical landscape in 2024 is complex, with important elections in the G7 countries. The rise of far-right parties, ongoing conflicts, and a fractious relationship with China contribute to a fragmenting world order, increasing economic policy uncertainty. AI adoption is seen as a potential solution for improving productivity and reducing unit labor costs. However, so far the supply-side potential from AI adoption has not yet translated into improved productivity figures.

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