2024 Global Market Outlook: Tectonic Shifts Create New Opportunities

The economic distortions of the past few years have produced tectonic shifts in the global investment landscape. The massive fiscal stimulus and near‑zero interest rates seen during the pandemic have given way to tighter monetary policies and sharply higher bond yields.

While the U.S. Federal Reserve and other major central banks have made progress against inflation and policy rates appear close to their peaks (Figure 1), our analysis is that the Fed is likely to hold rates steady in 2024.

Monetary policy effects typically are felt with a lag, so global economic growth remains at risk. The eurozone already is in recession, and China’s post‑pandemic recovery has been disappointing. However, the U.S. economic outlook is more encouraging, as corporations and consumers both have proven less sensitive to higher rates compared with other major global economies. Fiscal stimulus has added further support.

Uncertainty is likely to keep fixed income volatility high in 2024. But if major central banks remain on hold, volatility is likely to move to the long end of the yield curve, as opposed to the sharp moves seen at the short end as central banks tightened. Surging U.S. Treasury issuance also could keep upward pressure on longer‑term yields.

Attractive yields should support below investment‑grade (IG) corporates, with improved credit quality helping keep defaults relatively low. Shorter‑term IG corporates also appear to offer opportunities. Careful attention to issuer fundamentals will be critical.

The global equity rebound in 2023 was dominated by a handful of mega‑cap U.S. technology stocks. But positive fundamentals in some regional markets and innovations in other key sectors should help expand the opportunity set in 2024.

Health care innovation is one area that could offer opportunities, as could the energy sector, thanks to capital investment in both traditional and renewable energy sources. Commodity‑related sectors appear to have bottomed and could be attractive hedges if inflation proves stickier than expected.

Emerging market (EM) equities are attractively valued relative to developed markets. We see selective opportunities in China, despite sluggish economic growth. Within the developed markets, structural and cyclical factors should be supportive for Japanese equities.

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. Forecasts are based on subjective estimates about market environments that may never occur. 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.