With the collapse of Silicon Valley Bank and the Federal Reserve's frenzied interest rate hikes, global markets have almost been caught in a storm in 2023. The average American believes that high inflation and a slowing economy have not changed. But looking ahead to 2024, this dual worry seems to be converging, hinting at downside risks to global markets. In the foreseeable future, the following four major events could pose certain risks to the global market:
1.Lower-than-expected rate cuts: In an environment of lower interest rates, markets tend to have more optimistic expectations for future earnings streams. However, this trend may shift in 2024. Housing inflation in the U.S. may decline, but overall economic growth and wage inflation may be more resilient than expected. In the current market environment, any delay in cutting interest rates could trigger market turmoil.
2.U.S. economy in recession: Despite the frequent use of the word "recession," economic data does not fully support this view. However, the continued high inflation indicators and the possible delay in the Fed's interest rate cut could lead to a difficult situation for the U.S. economy, with a severe impact on the real economy.
3.Corporate earnings disappointed: Earnings expectations for 2024 are at an all-time high, about 11% higher than in 2023. However, in the case of less inflationary pressures, the ability of companies to raise the bar will be limited. Analysts may start to lower revenue estimates for many companies, which is a concern.
4.JPY appreciation risk: The Bank of Japan is likely to tighten monetary policy, especially if inflation is persistently above target. The JPY is often seen as a safe-haven asset, and its appreciation may reflect market concerns about global economic uncertainty, leading to a pullback in other risk assets, including global**.
Kunpeng Project