Europe

We describe and explain the wide disparity of wage inflation across G7 economies, and discuss what it means for the Fed, ECB, BoE, and BoJ policy moves in the coming year. Plus: we highlight two investments ripe for reversal, and two investments ripe for rebound.

Is the rebound in European PMIs enough to boost the appeal of European risk assets?

We present the performance review of the Global Fixed Income Strategy Model Bond Portfolio for 2023. We also discuss the outlook for 2024 performance based on our Key Views for the year. The portfolio is positioned to benefit from a year where the global backdrop will be one of weak growth and further declines in inflation, leading central bank to begin cutting interest rates.

Commodity volatility will continue its rising trend since 2014. The US is on the brink of a major election, the outcome of which could reduce its willingness to engage with the outside world. So, states seeking to carve out their own spheres of influence are incentivized to raise the economic costs to the US and discourage its influence in their regions. These states can do this by interfering in key trading routes in their regions. As a result, geopolitical threats to maritime chokepoints are a structural as well as cyclical problem and will persist due to the revival of superpower competition.

Middle East conflict, extreme US policy uncertainty, Chinese economic slowdown, US-Russian proxy war, and Asian military conflicts do not create a stable investment backdrop for 2024. Our top five “black swan” risks may be highly improbable, but they stem from these underlying trends.