Despite inflation and other pressures, the global economy is “remarkably strong,” according to insights in a new report.
These findings are in “A Strong Economy in a Fragile World,” a 2024 midyear outlook by J.P. Morgan Private Bank, which was released the report last week.
“The economy is stronger than you think, and, in our view, the global market rally should continue,” Jennifer Marks, head of J.P. Morgan Private Bank, Long Island, told LIBN.
The report comes at a time of an economically “complex environment,” according to the report. While forecasters began the year anticipating rapid inflation decline and rate cuts, inflation is still high. And there are other pressures, including geopolitical risks and U.S. election uncertainties. It’s why the “global economy is strong but fragile,” according to the analysis.
“Despite global inflation not falling as quickly as forecasters may have hoped, the global economy looks remarkably strong, defying the pressure of higher interest rates,” Grace Peters, global head of investment strategy at J.P. Morgan Private Bank, said in a news release about the report.
“However, we note that the world is at a delicate juncture,” Peters said. “On the one hand, higher growth, higher bond yields and higher equity valuations. On the other hand, higher inflation, higher geopolitical risks and potentially higher taxes.”
Still, Peters said, “we think positive forces can power markets forward in 2024. The global equity rally can broaden beyond the U.S. and mega market cap stocks.”
Marks offered insights for Long Island.
“While the rates have stayed higher for longer, they won’t stay high forever,” Marks said. “This should be a welcome change for prospective Long Island homebuyers and for private and public companies seeking M&A opportunities.”
And Marks said, “for investors, lower rates mean earning less on cash. Long Islanders who rely on their portfolios for income, may want to consider opportunities to lock in yield by investing in high quality bonds for a predictable income stream and to support an equity portfolio against market volatility.”
The report noted that the Federal Reserve is continuing to hold steady until inflation falls further, but other central banks have already started to cut rates.
“We think policy easing will support global risk assets,” Jacob Manoukian, U.S. head of investment strategy at J.P. Morgan Private Bank, said in the news release. “Unlike the 2010sbut similar to the 1990spolicy rates should stay above the rate of inflation.”
Meanwhile, household spending, particularly in the United States, remains strong.
“This is a boon for companies, which have rarely been better at turning sales into profits. These companies are now investing for the future,” Manoukian said. “A particular area of focus being on AI [Artificial Intelligence] where the impact on growth could be substantialperhaps even transformativewith evidence indicating that the AI productivity boost may appear in U.S. economic data by the end of the 2020s.”
As for the U.S. election, the private bank anticipates that pockets of the markets could be more sensitive to election results. These markets include small and mid-cap equities, the U.S. dollar and clean energy companies. Yet, in election cycles, the bank urges clients not to let results derail long-term, goals-based plans, and instead focus on constructing a well-diversified portfolio.
And the bank said, investors with concentrated exposure likely have more to fear from geopolitical risks than those with globally diversified portfolios. Investors can look to equities to harness global growth, real assets to hedge against inflation, and bonds to offer income and mitigate risk if economic growth falters.
The full report, including outlooks on European companies, Japanese stocks and natural resources in Latin America is available online .
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