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    RESEARCH  |  3 POINT PERSPECTIVE  |  MACRO SHIFTS

    Q2 2024 Global Outlook: US resilience leads the way

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    Contributors: Ajay Rajadhyaksha & Amrut Nashikkar
    14 Mar 2024

    The world economy is doing better than most analysts expected a year ago thanks to the unabated outperformance by the US economy, despite a two-year interest rate hiking cycle. Our Research analysts expect the US to dominate the macro story for the rest of the year, leading the world to a soft landing in which inflation comes down without major growth setbacks.

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    1. Conquering inflation without job losses

    Major economies have made great progress on inflation, which should continue to trend down in 2024, getting closer to the central banks' 2% target. In the US, our analysts expect core inflation to decrease to 2.5% by the end of the year, while in Europe, it should average 2% even as unemployment rates remain near historic lows. There have been bumps along the way – such as January figures for the US – but the downward trajectory has not changed.

    That opens the way for western central banks to start cutting rates in the second half of the year. The US Federal Reserve, the European Central Bank and the Bank of England have not rushed to lower rates because their economies have been more resilient to higher rates than initially expected. But some cuts are in the offing later this year, our analysts estimate.

    2. US exceptionalism to continue

    While the UK and euro area have done well to avoid job losses while bringing inflation down, they part ways with the US on growth. GDP in the former economies has been stagnant, while US growth has remained extremely strong. China's economy has also settled at a much slower rate than in previous decades. In this landscape, our analysts see the US as a stand-out. It will likely maintain its outperformance because it is now a world economic superpower in energy, the most important part of the global financial architecture, and now the world’s preeminent technology superpower. The US is at the forefront of the Artificial Intelligence revolution, which will likely boost capital spending in the near term and productivity in the longer run.

    The US engine should help the global economy to grow 2.9% this year, slightly below last year's 3.2%, a very acceptable trough for this business cycle. As China addresses its property market and other structural challenges, India has become Asia's growth engine and will likely continue to play that role for the rest of 2024. The world economy may grow even faster than what our analysts expect if the AI productivity boom happens faster than in previous technology breakthroughs.

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    3. The mighty dollar and US stocks

    US economic primacy will likely drive asset allocations in 2024. Our analysts expect the dollar's strength to persist, unusual for the end of a Fed hiking cycle, but supported by the structural features of the US economy, including the AI revolution and energy independence. The recent rally of US mega-cap technology stocks is justified by incredibly strong earnings and rising profit margins. Our analysts expect equities to outperform fixed income assets in the rest of the year as these factors support share prices in the US and elsewhere.

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    About the experts

    Ajay Rajadhyaksha

    Global Chairman of Research

    Ajay Rajadhyaksha is Global Chairman of Research at Barclays, based in New York. He drives the global macro research and strategy effort, including economics, rates, FX, commodities, emerging markets, and asset allocation. Since joining Barclays in 2005, Ajay has held various positions, including Head of Macro Research, Co-Head of FICC Research and, before that, Head of US Fixed Income Research and US and European Securitised Research.

    Amrut Nashikkar

    Managing Director, Fixed Income Strategy

    Amrut Nashikkar is a Managing Director in the Fixed Income Strategy team at Barclays based in New York, covering interest rate derivatives with a focus on interest rate volatility and the Libor transition. Amrut joined Barclays in 2008 from Lehman Brothers, where he was an interest rate strategist. Prior to that, he taught at New York University, where he graduated with a PhD in finance. He also holds a management degree from the Indian Institute of Management, Ahmedabad, and an undergraduate degree in engineering from the Indian Institute of Technology, Kharagpur.

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