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The window for a recession is closing

Published on 23.02.2024 CET

Macroeconomic update for March 2024

We long expected 2024 to be marked by lower inflation, lower interest rates, and a recession. While the latter remains a valid scenario, the unemployment rate has not yet risen noticeably, and an increasing number of global leading indicators point to an improving situation. Declining inflation and the expectation of lower rates may have contributed. This means that the window for a recession seems to be slowly closing.

We have tactically increased equities to overweight from neutral amid signs of PMIs bottoming out and declining inflation that could lead central banks to cut rates more than what is currently expected by financial markets.

Key Takeaways

  1. Recession or no recession?
    The US labor market has proven robust and has propped up the economy. Without it weakening in coming months, the window for a recession is closing.
  2. Slowing inflation and rate cuts
    We expect inflation to continue to ease. We would argue that this could lead central banks to make more significant rate cuts than the market is currently pricing in.
  3. Going overweight equities
    We ugprade our position in stocks at the expense of our exposure to commodities.

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ABOUT THE AUTHORS

  • Dan Scott

    Dan Scott

    Head of Multi Asset, CIO

    Dan Scott joined Vontobel in 2017. He is Head of Multi Asset, serving both institutional and private clients. Prior to joining Vontobel, he worked for many years at Credit Suisse as Deputy Head of Equity Research and at Kepler as a Swiss equity specialist. He began his career as a journalist in the late 1990s, first at Dow Jones & Company as a staff reporter for the Wall Street Journal, Barron’s, and DJ Newswires, and later as an on-air correspondent for CNBC.

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