Choose your location
Italy
English
Belgium
Denmark
Estonia
Finland
France
Iceland
Ireland
Latvia
Lithuania
Luxembourg
Netherlands
Norway
Portugal
Sweden
United Kingdom
2024 Global Market Outlook Midyear Update
ECB and BoE to cut as BoJ remains an outlier
Global Rates
For all developed market central banks (excluding the Bank of Japan (BoJ), which is an outlier), monetary policy is quite tight. They will want to avoid tipping their economies into recession. Consequently, these central banks can cut while preserving a tight monetary policy stance. In fact, they will probably ease proactively if inflation allows—if they wait until economic activity craters before cutting, they will be far behind the curve because it will be a long way back to neutral.1
Persistent wage growth will make ECB cautious over easing
(Fig. 3) The eurozone economy could be susceptible to an abrupt labor market slowdown
As of May 24, 2024.
Sources: ECB, European Commission.
As of May 24, 2024.
Sources: European Commission, Eurostat
Fears of labour market cracks lead ECB to act
Eurozone inflation has fallen to the extent that the ECB was able to cut rates in June. ECB policymakers think that eurozone employers have been hoarding labor over the past 12 months. This makes the region’s economy susceptible to an abrupt labor market downturn if corporate profit margins come under pressure amid softer final demand.
The big questions are: When will the ECB ease after June, and how large will the cuts be? The number of expected cuts has been steadily dropping, but we believe the ECB will likely cut twice before the end of 2024— however, it could be as few as once or as many as three times.
BoE likely to follow in the third quarter
There have been hopes that the BoE would follow fast on the heels of the ECB by cutting rates later in June, but we believe it may be a little later than that. With tentative signs that the UK economy is recovering, the BoE may not feel it needs to rush in cutting rates and is likely to wait until the autumn before doing so.
Gradual tightening from the BoJ
Japan has also struggled with inflation—but the lack of it rather than prices rising too quickly. After finally moving away from its subzero rates policy earlier in 2024, we expect the BoJ to continue gradually tightening while sounding dovish enough that the market doesn’t undo its work in boosting inflation. By tightening policy, the BoJ would also support the yen, which has plumbed multi‑decade lows against other major currencies in 2024.
1 The neutral rate neither stimulates nor restrains economic growth
Nikolaj Schmidt,
Chief Global Economist
Ken Orchard,
Head of International Fixed Income
Peter Bates, CFA
Portfolio Manager, Global Equities
Tim Murray, CFA
Capital Markets Strategist,
Multi‑Asset Division
Global Market Outlook Midyear Update insights
2024 Global Market Outlook Midyear Update
How central bank policy could impact your portfolio
Inflation
Reaccelerating inflation to make central banks walk tightrope
US Equities
US stocks face a broadening, not a rotation
Sign up to receive our monthly Global Asset Allocation Viewpoints from our Investment Committee
Each month, our Investment Committee prepare a report revealing the two market themes they are watching, their bull and bear views per region and their latest asset class over and underweights.
It has been designed to aid you in your decision making and client conversations.
Active investing may have higher costs than passive investing and may underperform the broad market or passive peers with similar objectives.
T. Rowe Price cautions that economic estimates and forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual outcomes could differ materially from those anticipated in estimates and forward-looking statements, and future results could differ materially from any historical performance. The information presented herein is shown for illustrative, informational purposes only. Any historical data used as a basis for this analysis are based on information gathered by T. Rowe Price and from third-party sources and have not been independently verified. Forward-looking statements speak only as of the date they are made, and T. Rowe Price assumes no duty to and does not undertake to update forward-looking statements. Where securities are mentioned, the specific securities identified and described are for informational purposes only and do not represent recommendations.
Additional Disclosures
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2024. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.
The S&P 500 Index is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”) and has been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® areregistered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Thisproduct is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing insuch product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.
MSCI. MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.