Choose your location
Germany
English
Austria
Belgium
Denmark
Estonia
Finland
France
Iceland
Ireland
Italy
Latvia
Lithuania
Luxembourg
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
2024 Global Market Outlook Midyear Update
Murky environment to challenge Fed policymakers
US Rates
Investors have steadily ratcheted back their expectations for Federal Reserve rate cuts in 2024. In most previous economic cycles, the Fed has been the first to ease, but the ECB was the first mover this time. We still see a slight possibility of a Fed cut this summer followed by the central bank cutting 25 basis points at its December policy meeting, after the November elections are out of the way.
Fed policymakers seem eager to implement an “insurance cut” or two in 2024 to preempt a slowdown—assuming that inflation moderates. The Fed believes that monetary policy is tight, so it would only take modest softening in the labour market to convince the central bank to cut.
The Fed wants to avoid any sign that it is influenced or motivated by politics, so will not act at the September or November Federal Open Market Committee (FOMC) meetings. In fact, a July rate reduction might be earlier than the Fed would act if it were not an election year.
Elevated potential for Fed surprises
The potential for surprises from the Fed is much greater than in a typical late‑business‑cycle environment. There’s an increasing chance that a lack of progress on getting annual core inflation to 2% will prompt the Fed to keep rates steady for an extended period. Stepping back for a broader view, we are more likely to see the Fed surprise with fewer cuts than with more. Preempting the question on whether it is possible that resurgent inflation could prompt the Fed to raise rates later this year, we place less than 20% odds on that outcome.
The outlook for Fed easing in 2025 is even murkier. Two to three cuts in 2025 are priced in now, which appears too dovish. One or two rate reductions next year seems more realistic. And there is a risk that “insurance cuts” by the Fed could allow inflation to fester and raise the chances of the Fed moving back to a hiking bias in 2025.
Rate cut expectations have fallen steadily in 2024
(Fig. 2) Rising inflation concerns have dampened anticipation of significant easing
As of May 22, 2024.
Source: Bloomberg Finance L.P.
Actual outcomes may differ materially from any expectations made.
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
Global Rates
ECB and BoE to cut as BoJ remains an outlier
Inflation
Reaccelerating inflation to make central banks walk tightrope
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.