Global Economic Overview – October 2024
As the world anticipates the U.S. presidential election on November 5, the economic outlook remains cautious. A Harris victory would likely maintain the current policy course, whereas a Trump win could introduce new trade barriers that might curb global growth by an estimated 0.3% to 0.5% over the next year, according to consensus forecasts.
Heightened Geopolitical and Market Uncertainty for Investors
Current international dynamics continue to add pressure to markets. Middle East tensions, Russia’s ongoing war with Ukraine—now over 600 days long—and U.S. election polls showing a narrow margin all contribute to a volatile investment environment.
October saw a continuation of September’s trends. Eurozone preliminary PMI figures hovered around 49.3, suggesting a contraction, which further encourages the European Central Bank (ECB) to consider additional rate cuts.
In the U.S., economic indicators show resilience. Third-quarter GDP growth came in at 2.6% (annualized), beating expectations, and inflation is close to the 2% target. This environment has led to a recalibration of Fed rate cut expectations, now forecasted at around 0.25% in mid-2024 rather than early 2024. Assuming inflation stabilizes at current levels, both the ECB and Fed are likely to bring interest rates back toward a normalized range of 2% to 2.5% over the coming year. However, U.S. election results could significantly influence this outlook.
Regional Market Insights
United States
Data continues to reflect a solid U.S. economic foundation, with corporate earnings growing by approximately 7% year-over-year in Q3. Yet, uncertainties regarding the election outcome, potential shifts in Fed policy, and geopolitical risks suggest that volatility could increase by as much as 15-20% in major indices like the S&P 500. Investors should remain cautious.
Equities
Global stock markets are projected to benefit from falling rates, positive corporate earnings growth, and potential stimulus from China, which could lift equities by 5-8% over the next two quarters. In the U.S., continued growth in AI-related sectors has boosted the NASDAQ, up 12% year-to-date, reinforcing its appeal as a high-growth market. Broadly, a combination of U.S. economic strength, potential global rate cuts, and anticipated Chinese stimulus could create a positive environment for equities globally.
Eurozone
The eurozone’s economic recovery is slowing, reflected in a lower-than-expected 0.1% growth in Q3. Weak domestic demand and softening labor demand, particularly in Germany where job postings are down by 4% year-over-year, weigh on the outlook. The labor market remains somewhat resilient, with unemployment steady at 6.4% across the region. Inflation dropped sharply to 1.7% year-on-year in September, but elevated service prices (up 2.2% year-on-year) remain a concern for the ECB. While a 50 basis-point rate cut in December has been hinted at, market consensus leans toward a 25 basis-point reduction.
China
China’s September economic data hints at a positive, albeit gradual, economic shift as Q3 ends, with GDP growth for the quarter at 4.8% year-over-year. Fiscal support is becoming clearer, though full implementation details are still awaited. Expected fiscal stimulus could potentially boost GDP growth by 0.2-0.3% in early 2025. While this support positively influences short-term forecasts, anticipated shifts in U.S.-China trade relations post-election could adjust this outlook.
