Looking at what’s ahead

Macroeconomic update for February 2024

It may seem like the same old topics are being rehashed – but there’s a good reason for that. They are still front and center after the rapid rate-hike cycle has concluded.

We don’t foresee inflation as something to be overly concerned about at the moment. But the tailwinds that have provided the US economy with a boost – resilient US consumers and a stronger-than-expected labor market – have started to exhibit signs of weakness. It does take some time for higher rates to work their way through the economy, so we believe we will eventually see the impact on the job market, and a short and shallow recession will materialize.

In terms of asset allocation, this means we’re taking an overall defensive stance with a quality bias, which translates into a preference for government bonds – a sweet spot for our macro scenario of lower growth, inflation, and rates – and for gold and quality stocks. The former profits in times of rising geopolitical uncertainty, while the latter are our preference in a challenging economic environment.

Key Takeaways

1. Strong US labor market has kept economy afloat
   But for how much longer? We believe the impact from higher rates will eventually weigh on the job market, and that a short and shallow recession will materialize.
2. Inflation is coming down – but how quickly?
   There is a clear downward trajectory, and we do not see inflation as something to be overly concerned about in 2024.
3. We prefer a defensive stance with a preference for quality
   We highlight our preference for government bonds, gold, and quality stocks.

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