MID-YEAR OUTLOOK | 2024A strong economy in a fragile world

Companies have shrugged off higher rates. Yes, geopolitical risk is real. But the economy is stronger than you think. AI is just starting. Stocks could move higher. Embrace the rally.

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Healthiest economy in decades? It looks that way

What’s wrong with this picture? Not much. Key macro and market variables – growth, unemployment rates, household incomes, corporate profit margins, yields on government bonds – look as healthy as they have in decades. Investors may consider equities and real assets to mitigate inflation risk. Bonds can bolster portfolios if economic growth falters.

It’s not a dream: AI can power productivity

It took 15 years for the personal computer to increase the economy’s productivity. AI could do it in seven. Today, less than 5% of U.S. companies are actively using AI. But the potential use cases span almost every industry.

Households, the economy’s engine, are purring along

Consumers are earning money to spend. Their consumption is a boon for companies, which have rarely been better at turning sales into profits. These companies are now investing for the future. We don’t expect mass layoffs to put household incomes at risk. Consumers, the economy’s growth engine, can power onward.

A new turn of the central bank cycle

The Federal Reserve is holding steady until inflation falls a bit further. But other central banks have already started to cut rates. We think policy easing will support global risk assets. And unlike the 2010s – but like the 1990s – policy rates should stay above the rate of inflation.

Stocks find their inflation sweet spot

A little inflation can go a long way. Companies can raise their prices while keeping costs under control. No wonder equities have returned nearly 15% a year on average with inflation between 2% and 3%. In a higher growth environment, stocks' ability to hedge against inflation could be especially valuable.

Even the optimists may underestimate AI's potential

By the end of the 2020s, evidence of AI's productivity boost could show up in U.S. economic data. That's half the time it took for the PC and internet to deliver economic benefits. Data centers, many AI-linked, could be the largest contributor to U.S. power demand growth through the end of the decade.

Is quality on sale in the small-cap space?

Small-cap companies feel the sting of higher interest rates more than large caps. But today’s near-record discount between the highest-quality small caps and their large-cap counterparts makes little sense. This could be an interesting entry point to build a portfolio of attractively valued quality small- and mid-cap names.


Should you hedge geopolitical risk – and if so, how?

When tensions flare, equity markets react. But the impact usually doesn’t last. Still, gold has been especially effective for tactical investors looking for a hedge. It has historically rallied just before and during geopolitical events. Adding to gold’s appeal: Central banks have recently been increasing their purchases.

Elections won’t solve the growing U.S. deficit

Whichever candidate becomes U.S. president in November, the federal debt and deficit probably won’t be winners. Both will likely deteriorate further. In the near term, bond market volatility could spike. To reduce the debt burden over the long term, we don’t see a way around higher taxes. U.S. investors need to prioritize tax efficiency.

Investing in security in an insecure world

Escalating geopolitical risk is forcing countries to invest in security, defense and infrastructure. U.S. defense spending as a share of GDP is at post-WWII lows. Only 12 NATO countries are currently meeting their obligations on defense spending. We believe this decades-long decline will likely reverse.

Geopolitics are global, but lasting market impact is local

While geopolitical events usually have no lasting impact on equity returns, they can have profound market impacts at the local level. Case in point: German stocks after Russia invaded Ukraine. Less diversified globally and with less tech exposure, German small caps were especially hard hit.

Trying to bring critical goods production back home

Policymakers are paying attention. Governments will likely continue to incentivize domestic production of critical products such as semiconductors and batteries. China is still the largest source of U.S. advanced technology product imports at more than $165 billion a year.

U.S. election: Dollar or clean energy could gain

These markets could be most sensitive to the U.S. election outcome: Small- and mid-cap equities (they’d likely welcome the prospect of less onerous regulations with a Trump win); the U.S. dollar (which could strengthen if tariffs loom); and clean energy companies (they’d likely prefer a Biden re-election).


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Companies are buying back stock, economic fundamentals are improving – it’s a new chapter for Corporate Europe.

Europe - Download full report (PDF)

Latin America

Latin America could play a key role supplying critical raw materials for the energy and digital transitions

Latin America - Download full report (PDF)


Large structural shifts are underway in Japan, creating opportunities not seen in decades.

Asia - Download full report (PDF)

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A strong economy in a fragile world

Date: June 13, 2024
Time: 11:00 a.m. ET

Join Tom Kennedy, Chief Investment Strategist, Abigail Yoder, U.S. Equity Strategist, and Clay Erwin, Global Head of Investment Sales & Trading as they discuss five considerations that may help you navigate the current environment:

  • We believe the economy is stronger than you think. The global market rally should continue.
  • Artificial Intelligence is just getting started. The path is uncertain, but the impact could be massive.
  • Rates will likely be higher for longer, not forever. Capitalize on dislocations in real estate, private equity, small and medium cap equities now.
  • Prepare for continued conflict. Consider diversifying and investing in security, defense, and infrastructure.
  • The U.S. election will likely have global effects. Don't let them disrupt your plans.