As 2024 unfolds, global markets continue to face a cocktail of challenges, prompting many to ask: will the global economy avoid a recession this year? With inflation rates still elevated, interest rate hikes, and ongoing world risks, the outlook is uncertain.
Inflation and Interest Rates: The Numbers Behind the Fear
Inflation has been a persistent issue globally. In the UK, inflation peaked at over 11% in 2022, with a gradual decrease to 6.7% by late 2023. While central banks like the Bank of England and the US Federal Reserve have implemented aggressive interest rate hikes, these policies are a double edged sword.
As of October 2024, the Bank of England’s base rate sits at 5.25%, while the Federal Reserve’s rate is between 5.25% and 5.50%. This tightening of monetary policy has cooled inflation, but the risk is that prolonged high rates may stifle economic growth. Economists project global GDP growth will slow from 3.1% in 2023 to around 2.7% in 2024 teetering dangerously close to recession territory.
Global Supply Chain Recovery: A Lingering Issue
Supply chains, still reeling from the pandemic, remain vulnerable in 2024. Industries such as semiconductors, consumer electronics, and automotive manufacturing are still facing disruptions. According to the World Bank, global trade growth is expected to slow to 1.9% in 2024, significantly down from pre pandemic levels.
Energy markets, especially in Europe, have been hit by the war in Ukraine. Gas prices in the EU remain 35% higher than pre-2022 levels, further weighing on industrial production and inflation in the region.
Investor Insights: Navigating Uncertainty
We stress the importance of looking at the bigger picture when making investment decisions in such uncertain times. While the threat of a recession looms, opportunities still exist. Sectors such as energy, technology, and healthcare are proving resilient. The FTSE 100 has managed to stay above the 7,500 mark through 2024, despite volatility.
Investors might consider fixed income assets as bond yields have risen with the interest rate hikes. UK government bonds now offer yields above 4%, making them attractive for those looking to hedge against stock market downturns.
While the global economy might dodge a recession in 2024, the situation remains fragile. High inflation, supply chain disruptions, and rising energy costs all add to the uncertainty.
Content on IceburgWealth.com is for informational purposes only and not intended as investment advice. While we strive to provide accurate and up-to-date information, Iceburg Wealth is not responsible for any errors or omissions, or for outcomes resulting from the use of this information. Readers should seek professional advice before making any financial decisions.