The window for a recession is closing

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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