Big Picture: Monthly Outlook

The global cyclical expansion is showing signs of stalling. We expect global growth to slow from above 3% in the first half of 2024 to below 3% in the second half, with a cyclical acceleration only materialising in 2025 as policy easing starts to feed through to the real economy.

Markets anticipated a Trump victory heading into Election Day, with US equities rising while longer-dated US Treasuries sold off. In addition  to being the best economist, the S&P 500 is also a good political analyst.

Donald Trump will become the 47th President of the United States, backed by a Republican sweep in Congress. The second Trump presidency should differ vastly from the first one. It is expected to follow a more libertarian ideology, including a smaller government. However, confronted with limited visibility, investors should not front-run an assumed Trump policy agenda and its outcome.

The Fed cut rates by a further 25 basis points at its November meeting. The market has started to scale back its rate-cut projections, and we agree.

Economies around the globe

US

Easing inflation towards target and a cooling labour market prompted the Fed to start its rate-normalisation cycle with a 50bps cut. We expect an additional 150bps to follow, bringing the fed funds target to 3.5% by June 2025.

Eurozone

Inflationary pressures continue to ease on the back of weak demand and increasing slack in the economy. The ECB has ample room to ease its policy. We expect further rate cuts of 150bps to bring the deposit rate to 2.25% by April 2025.

UK

The growth recovery is losing steam and inflation is receding, enabling the Bank of England to cut interest rates at a more gradual pace. Structural productivity-related issues and tax hikes on employment suggest medium-term growth risks.

Japan

Given the uncertain sustainability of the recovery and inflation remaining near target, further Bank of Japan policy tightening is likely to remain cautious. Political uncertainty has increased after the elections brought in a minority government. 

China

Economic activity remains subdued and deflationary pressures persist. Stimulus measures are mainly focused on mitigating risks rather than on reviving domestic demand.

Switzerland

With inflation lower than expected, the Swiss National Bank signalled further rate cuts to come. We expect two more rate cuts of 25bps, taking the policy rate to 0.50% by March 2025.