China

The market’s pricing of a soft landing means that geopolitical risks are becoming more, not less, relevant in 2024. US domestic divisions will invite challenges as foreign powers rightly fear that US policy will turn more hawkish after the election.

A low multiplier effect of stimulus will reduce the magnitude of the rebound in China's business activities in 2024. The housing market downturn will likely persist, and the ongoing household deleveraging also poses a significant challenge to China’s economic recovery.

The market is excited by the idea that the Fed will cut rates early this year, even without a recession. But is that likely, with inflation still set to be around 2.8% mid-year?

The statement from last week’s Central Economic Work Conference indicates that Chinese authorities are still not considering large-scale stimulus in 2024. Odds are that a full-fledged business cycle recovery in 2024 is unlikely. Chinese share prices remain vulnerable, and strengthening in the RMB will be short-lived.

Explore the eight main themes that will drive the returns of European assets in 2024.

The major question facing EM investors in 2024 is whether or not EM will cross the Rubicon. The path to a soft landing in the US remains elusive. The recent improvement in global manufacturing/trade will likely prove to be a mid-cycle bounce rather than the beginning of a cyclical recovery.

Political economy dominates fundamentals going into 2024, as states prepare for war and de-risk supply chains. Asynchronous global growth will elevate commodity-price volatility. We expect oil to trade above $100/bbl in 2024 and continue to favor equity exposure to oil-and-gas producers. Given weak capex, we also favor metals miners and refiners. We remain long the Gold, the XME and COMT ETFs We were stopped out of our XOP ETF with a 12.5% gain; we will re-establish it at tonight’s close.