Expansionary fiscal policy has driven higher than expected US growth, but going forward, we expect growth acceleration to favor the rest of the world versus the US.
Given rich long-term valuations and high funding needs, the US dollar looks vulnerable, and investors in global debt may benefit as the Fed moves to reduce rates.
Improving global growth and loosening financial conditions should benefit global fixed income, and we believe the normalization of yield curves could generate excess returns as it corrects.
As US growth continues to surprise to the upside, 2024 is shaping up to mirror the last few years, in which US growth exceptionalism seemed to be the rule. This year, the US isn’t alone in its post-pandemic resilience. Global growth is also surprising positively.
Improving global growth conditions have been led by emerging market countries, such as India, and supported by resilient US growth. We expect global growth to broaden over time, as Europe recovers from a weak year, dragged down by Germany.
China’s growth outlook remains uncertain. Government measures appear sufficient to support growth at market consensus levels of 4% to 5% for 2024. Asia remains the weak link in global growth, except for India, which has provided exceptional nominal and real growth. We expect that to continue for the foreseeable future.
Read our Global debt midyear outlook.
Get an analysis of important drivers of global fixed income markets, including macroeconomic trends, interest rates, currencies, and credit, in our monthly global strategy report.
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