The Swiss private banking group, has just released its market outlook for the rest of 2023 .
For Julius Baer, the ‘year of the cool-down’ continues. However, there have been some changes in expectations for 2024. Central banks have chosen to tighten monetary supply more than expected, leading to revised projections for global inflation and growth. It is expected that the global inflation rate will slow down to between +5% and +6% by year-end, with growth slowing to around +2.5%.
The article highlights that while these projections are still distant, the divergences in the global economy are likely to persist for the foreseeable future. The US is expected to cool off more compared to other countries, which have seen a resurgence in economic activity. China is catching up after reopening, and Europe is expected to experience only moderate slowing, driven by Chinese demand. The global economy is anticipated to be better balanced by 2024.
Regarding the chances of a recession, the article mentions that recession risks for the US are now material, with bond yield models indicating a 50% probability of a recession occurring within the next 12 months. However, it emphasizes that any recession is likely to be mild. Furthermore, the risks of a globally synchronized recession are deemed lower due to the divergent economic performances of the US, China, and Europe. The article attributes the potential mildness of a US recession to the conservative financial position of private households and their relatively high cash holdings compared to the pre-Great Financial Crisis period in 2007.
