Economic Outlook – Spring 2024

Summary

• One of the overriding narratives with respect to the economic outlook over the last few years has been the expectation that a downturn was imminent.
• The argument was that generationally-high inflation and the aggressive and synchronized global monetary tightening cycle that came as a result would choke off growth and spur a deep recession that would result in widespread job loss, falling earnings and financial market pain.
• Despite this dearth of investor enthusiasm, however, economic activity remained resilient in the face of ongoing headwinds that were further compounded by geopolitical uncertainty.
• There were signs of growth slowing — and even some stagnation outside of the US — but expectations for momentum to fully rollover were consistently met with positive surprises.
• The dataflow now is not only suggesting that trajectory for global growth is not turning down, but there are signs that momentum was actually improving and doing so more broadly.
• Against the growing weight of evidence, and with the anticipation of major headwinds of high inflation and interest rates ebbing in the months to come, forecasters and investors have largely removed a downturn from their outlooks. Consumers and businesses are increasingly getting onboard with the idea that perhaps things may not be as bad as once thought, and that those worst-case scenarios long assumed to be looming could end up being avoided.
• After a tumultuous and highly uncertain last few years, the greater clarity on the outlook easing headwinds are clearly welcome. With that said, while the economic forecasts are tilted to the upside and confidence intervals are narrower than they have been in last four years, that does not mean that there are no risks.
• In particular, there is likely to be ongoing jolts of volatility related to developments around geopolitics and the path for policy rates that will keep a focus on being selective and managing risk exposures.