Policy
The overarching macro theme for China in 2024 will be deflation and its impact on the economy, macro policies, and financial markets. Widespread deflation, in combination with high debt levels and falling real estate prices, has unleashed debt deflation and balance sheet recession dynamics. The latter are rendering monetary policy inefficient.
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.
In this Special Report, we take an in-depth look at the outlook for monetary policy in Australia and discuss the impact of an elevated policy rate on the economy. We recommend an underweight country allocation to Australian government bonds and look for opportunities to go long the Australian dollar.
Illegal immigration into the US has skyrocketed to record levels. Correctly accounting for this, US real consumption growth on a per head basis is already fragile. Meanwhile, the real bond yield is only now approaching the pain point that typically triggers a recession. Ahead of the upcoming US jobs report, we point out what it would take for the Joshi rule real-time US recession indicator to breach its event horizon. And how to position in stocks and bonds, both tactically and cyclically. Plus: potential turning points in Biotech and Genome, ADBE, and Taiwan versus China.
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.
