Macro Matters January 2024

(Source: Merlea Macro Matters)


Key factors to monitor for the 2024 global economic outlook include – US interest rates, oil prices and the Chinese economy. 

 The resilience of the world economy in 2023 surpassed initial expectations, with global inflation decreasing without significant spikes in unemployment. Despite these positive signs, policymakers remain cautious in their pursuit of a “soft landing.” The Organization for Economic Co-operation and Development (OECD) predicts a slowdown in global output in 2024, attributed to high interest rates curbing persistent inflation. The OECD does not anticipate growth to rebound until 2025, coinciding with anticipated aggressive interest rate cuts by leading central banks. Global Gross Domestic Product (GDP) is forecast to rise by 2.7 percent in the upcoming year, slightly down from 2.9 percent in 2023. 

The aftermath of the COVID-19 pandemic and escalating energy prices following the Russia-Ukraine conflict contribute to a prolonged fiscal recovery. Even if monetary policies begin unwinding in the coming year, global interest rates are expected to remain elevated compared to recent historical standards. 

While economic forecasting is inherently uncertain, the unexpected resilience of the U.S. economy in the face of rising interest rates provides a glimmer of optimism. The Federal Reserve’s efforts to curb inflation through interest rate hikes have not led to a recession, and the U.S. economy has maintained a surprising, annualised growth rate of 2 percent. However, signs of concern emerge as unemployment inches up, pandemic-era savings dwindle, and the corporate sector faces increased financing risks due to higher interest rates. 

The trajectory of U.S. interest rates is a crucial variable to monitor in the coming year. According to CME FedWatch, there is a 50-70 percent probability of a rate cut in March, signalling potential shifts in the economic landscape. 

Brent crude oil prices, influenced by geopolitical tensions in the Middle East, remain a significant factor. The World Bank’s warning of potential price spikes due to wider conflicts in the region has not materialised, and current prices, despite recent incidents, are relatively stable. Factors such as increased global energy resilience, enhanced fuel efficiency, and greater availability of renewable energy contribute to the market’s ability to absorb potential disruptions. 

China’s economic activity also plays a pivotal role in the global outlook. The aftermath of strict “zero-COVID” controls and a property sector slowdown pose challenges to China’s recovery. Moody’s recent downgrade of China’s debt rating reflects increased risks from lower medium-term growth and ongoing downsizing of the property sector. Credit growth driven by government financing is aiding stabilisation, but concerns about the overall credit structure persist. 

Economists are closely monitoring China’s credit growth as a barometer of its economic recovery. While a slowdown in credit expansion is anticipated, its impact on GDP and global growth may be limited. The expectation of further stimulus measures from China’s government underscores the ongoing uncertainty in global economic forecasts for 2024. As history has shown, predicting soft landings remains a challenging endeavour. 


Global bond yields, led by the US, are anticipated to trend lower, building on November’s robust rally. The Federal Reserve’s assertive tightening measures are likely concluding, fuelled by a clear decline in inflation. Despite the resilience of the US consumer and labour markets, the sustainability of this trend is questioned, potentially necessitating future rate cuts to mitigate a sharper downturn. 

Simultaneously, the growth outlook for Europe and the UK dims amid the yet-to-be-realized impacts of significant policy tightening. With mounting evidence of sharp declines in inflation in both regions, we anticipate rate cuts by the European Central Bank (ECB) and the Bank of England (BoE) in the first half of the upcoming year. Additionally, the near-term depreciation of the US dollar (USD), coupled with the Fed’s easing cycle gaining momentum, is expected to push yields lower across EM local debt markets, particularly in nations like Mexico where nominal and real yields are historically high. 

As we step into the new year, our attention turns to the macro-economic landscape and the challenges it poses for investors in 2024. Although predicting the future remains uncertain, our analysis relies on the yield curve and various data points to strategically position portfolios. 

Australia’s Economic Landscape: A Delicate Balance 

Following extensive fiscal and monetary support during the COVID-19 pandemic, the focus now shifts to combatting persistent inflation. Observations suggest that, if not already at peak cash rates, we are very close. The domestic economy is cooling, and the delayed impact of interest rate increases is anticipated to trigger a credit default cycle, affecting both corporates and households burdened by significant debt. 

Concern arises regarding ultra-low fixed-rate mortgages transitioning to variable rate loans, exposing mortgage holders to the full impact of consecutive rate rises. For instance, in Australia, a $1,000,000 mortgage fixed at 1.99% p.a. for a 30-year term during the COVID-19 lows would double its monthly repayments if rolled onto today’s standard variable rate of 8.80% p.a., leading to widespread mortgage stress amid existing inflation-driven cost-of-living pressures. 

Navigating Uncertainties: Three Potential Paths: 

As central banks grapple with managing inflation and preventing a recession, three scenarios emerge – interest rates remain steady, rates are cut, or rates rise. Below, we delve into the implications of each scenario for investor. 

Interest Rates Remain on Hold 

Extended stability in rates suggests previous hikes are adequate, and inflation is receding orderly. Higher yields on assets like the 10-year Australian Government bond, now at 15-year highs, provide income and liquidity for investors. 

Interest Rates Are Cut 

In the event of an economic downturn following rapid rate hikes, central banks may cut rates, offering substantial returns to bond investors. This scenario benefits bond holders as existing bonds become more attractive relative to new issuances or alternative investments. 

Interest Rates Rise 

In response to unforeseen shocks, further interest rate increases may occur. While challenging for investors across asset classes, numerous additional rises are not anticipated, given the already implemented rate hikes filtering through the economy. 

Our Perspective 

Time will reveal if the RBA’s November 2023 cash rate rise marked the peak, but our assessment indicates we are at or near the zenith of cash rates. This prospect is particularly promising for bond investors, with yields now restored to levels not seen since the Global Financial Crisis. Drawing on historical patterns, we anticipate a period of cash rate cuts towards the end of 2024. 


Listed Property 

The anticipation of potential interest rate cuts in 2024 has significantly lifted the outlook for listed real estate companies, whose performance is closely linked to the cost of debt. 

In the concluding months of 2023, real estate investment trusts (REITs) surged as global inflation eased. The sector yielded almost 12% throughout the year, with most gains realised in the last three months of 2023, outpacing broader equities that closed slightly above 8% for the year. 

Driving the rebound of REITs was the substantial decline in bond yields, which move inversely to bond prices, as traders adjusted their expectations on the rate cycle. Yields on 10-year Australian Treasury notes dropped from nearly 5% in October to below 4% by the end of 2023. REITs, often seen as bond proxies, tend to see improved valuations as Treasury yields decrease. 

While stable rates would be positive for the REIT sector, they would also sustain pressure on earnings and asset values. Our base case, we believe stocks with robust balance sheets and superior earnings momentum will likely outperform. 

In the event of earlier-than-expected rate cuts, residential developers such as Mirvac and Stockland could be key beneficiaries. Additionally, “deep value” stocks with funds management operations, including Charter Hall, Centuria, GPT, and Dexus, would benefit if borrowing costs decline, and the slow transactions market resumes activity. 

The stellar performance by Goodman has kept the REIT sector ahead of the broader equities market. Excluding Goodman, the REIT sector could move up the pecking order within Australian equities in a rate-cutting cycle. 

As debt cost headwinds ease, with expectation of rate cuts in 2024 and 2025, increasing the likelihood of earnings upgrades after two years of downgrades. Another positive factor for the REITs sector in 2024 is that the market has already factored in anticipated devaluations of commercial property portfolios, particularly for office and mall assets, totalling around 18%. Investors are now looking beyond potential asset write downs, which are expected to bottom out this year, foreseeing a positive performance in the listed market. 

Looking at the broader picture, the headwinds impacting the A-REIT sector are mostly in the past, and it is now time to focus on the future. We suggest investors consider whether an A-REIT is well-positioned with a strong balance sheet to seize market dislocation opportunities and prepare for the next phase of the economic cycle. 

While the possibility of consolidation in the sector is considered unlikely for 2024, equity analysts suggest that A-REIT outperformance historically begins zero to four months before the first RBA rate cut. With a potential rate cut in the second half of 2024, this positions the second quarter of the year as an opportune time for a return to REITs. 

Australian Equities 

In reflecting on the performance of Australian equities throughout the past year, it is evident that they have had a relatively subdued performance compared to global equities. The sector mix in Australia has posed challenges, and lingering uncertainties regarding inflation and interest rates have restrained the local market’s momentum. Despite this, we maintain our belief that global shares will likely outperform their Australian counterparts, at least within a six-month timeframe. 

Australian market has been struggling against a lacklustre earnings cycle 

However, the potential for a further resurgence in the Australian dollar may temper this global outperformance, leading us to retain a partial currency hedge on global equities. 

While recent cooling in local inflation and growth data has provided a lift to the equity market in recent weeks, it appears that Australia requires more confidence in the commencement of a Reserve Bank of Australia (RBA) easing cycle for the market to break free from its current trading range. 

Looking ahead, the path of inflation in 2024 will be a crucial factor, with the upcoming release of the fourth-quarter 2023 consumer price index (CPI) on January 31 serving as a key indicator of the trajectory toward lower policy rates. Improved sentiment toward the Chinese economy, especially in the resource sector, could positively influence the local market. However, the anticipation of a globally slower year for growth may act as a constraint on commodity prices. Overall, we maintain a neutral stance on the local market. 

In summary, our central macroeconomic view envisions a gradual decline in inflation, slower yet positive economic growth, moderate earnings growth, and potential central bank rate cuts, creating a relatively constructive backdrop for equities and fixed interest. 

While we remain vigilant in monitoring inflation trends, we are reasonably confident that global inflation will continue to decrease over the next 12 months. The primary risk, in our perspective, lies in a more substantial-than-anticipated global economic and earnings slowdown. However, our base case anticipates a relatively mild slowdown. In the event of a significant global growth deterioration, equities might face challenges, but this would likely boost demand for fixed interest. Hence, we maintain an overweight position in fixed interest, given its appealing risk-return profile. 

Australian inflation, though persisting more than global inflation, is expected to decrease sufficiently in the coming year, allowing the RBA room to ease policy in the latter stages of 2024. While the Australian economy is projected to expand at a 

below-trend pace in 2024, avoiding a recession, Australian equities, while not appearing expensive, grapple with macroeconomic clarity and earnings growth challenges into 2024. Positive global share-market conditions should lend support to the domestic market, although a decisive break to the upside may be delayed until later in 2024, contingent on a clearer outlook for domestic interest rates. 

Global markets 

In 2023, global markets have surpassed expectations, largely propelled by the standout performance of mega-cap technology stocks, commonly referred to as the Magnificent Seven. The prevailing investor sentiment has transitioned from a fear of an impending recession to an optimistic belief in an imminent soft landing. Despite this positive shift, Citi fear and Greed index which measures investors psychology reveals elevated investor optimism, even though the gains in the market have been concentrated among specific sectors. Excessive optimism raises concerns as it can render the markets more susceptible to potential overcorrections. As we look ahead to 2024, our outlook adopts a more cautious stance. This cautious approach stems from factors such as restrictive monetary policies, a deceleration in growth, and escalating geopolitical tensions, which collectively contribute to a nuanced and potentially challenging market environment. 


Despite the notable decline in headline US inflation, the underlying inflationary pressures have yet to fully align with target-consistent rates. While we anticipate that the Federal Reserve (Fed) has concluded its tightening phase, the ability to transition into an easing stance may be hindered until the slowdown is more advanced. Our outlook maintains expectations of a mild US recession starting from mid-2024, with Fed rate cuts anticipated thereafter. Should interest rate cutting cycles commence, we project a more expedited and deeper trajectory than what is currently priced in by the markets. This projection is grounded in our assessment that equilibrium policy rates persist at lower levels due to ongoing structural challenges and the diminishing impact of pandemic-related distortions. 

Rate cuts should start in mid-2024 

Although the equilibrium real interest rate (r*) remains low, there is a potential for the term-premium component of bond yields to undergo a structural increase. Heightened concerns about fiscal sustainability arise from large deficits amid economies operating beyond full employment and elevated interest rates. While we do not foresee fiscal crises, the fiscal impulse is expected to shift towards a more negative trajectory, and fiscal policy may have limited room for expansion during any economic downturn. 

Additionally, shifts in central bank balance sheet policies, particularly in Japan, suggest a diminishing influence on bond yields from quantitative easing and yield curve control (YCC). The landscape of political event risk is anticipated to intensify in 2024, given the numerous significant elections and geopolitical tensions. In the US, current polls marginally favour Trump over Biden, and potential challenges for risk assets in another Trump term could arise from constraints on tax cuts due to a likely split Congress and the substantial US deficit. 

Proposals to increase tariffs may further complicate the outlook. Meanwhile, downside risks to the global economic landscape stem from potential escalations in the Middle East and a surge in oil prices, although the probability of these scenarios remains low given diplomatic safeguards. On the upside, improvements in the global economic outlook are primarily associated with the potential for a soft landing in the US, a path that is broadening as supply conditions show signs of enhancement. 


Eurozone GDP experienced a contraction of 0.1% in Q3, primarily driven by a narrow decline, notably marked by a German recession and fluctuations in Irish national accounts leading the downturn. Despite this, 2024 growth forecasts have been revised upward to 0.5%, considering this outcome alongside a marginal improvement in surveys. Although the Q3 GDP contraction may signal the initiation of a technical recession, the substantial distinction between a quarter of very modest growth and a quarter of very modest contraction is minimal. Regardless, the forthcoming recovery in the next year is anticipated to be gradual, given the challenging global backdrop. 

In terms of inflation, the headline inflation experienced a significant decrease in October, with the year-over-year rate dropping from 4.3% to 2.9%, attributed in part to energy base effects. However, the deceleration in disinflation is expected to slow as base effects begin to exert upward pressure on the headline rate again. Additionally, the discontinuation of various government energy bill support packages is projected to sustain higher inflation levels in Q1 2024. Core inflation is anticipated to remain resilient, influenced by labour market tightness, leading to a prolonged period for underlying inflation dynamics to return to target-consistent rates. We anticipate the headline inflation rate to converge back to the target in the second half of 2024. 

Eurozone technical recession is probable. 

Source: Bloomberg, Refinitiv, Haver, abrdn, November 2023 

Regarding policy decisions, the European Central Bank (ECB) maintained its key rates in October. The official policy guidance indicates an intention to retain rates in restrictive territory for a significant period. Aligning with the ECB’s communication, we foresee rates being held at their current levels until the middle of 2024. While intervention in bond markets is currently ruled out, given the recent reduction in peripheral bond spreads, we anticipate a swifter return to target inflation than the current ECB forecasts suggest. This is expected to trigger an acceleration in the easing cycle starting from the second half of 2024. 

UK headline inflation no longer looks like such an international outlier, after it fell sharply in October, dropping from 6.7% year over year to 4.6%. This was in large part due to very favourable energy base effects, and the progress back to 2% is likely to slow from here as this tailwind has now passed. However, fading food price growth should continue to help. While the labour market has cooled recently, the strength of UK wage growth remains an outlier, particularly given sluggish productivity growth, suggesting that underlying inflation pressures still need to moderate further. 

We think the next move in interest rates is more likely to be down than up, with Bank Rate having peaked at 5.25%. Elevated wage growth and modest fiscal stimulus means the Bank of England (BoE) is likely to continue to signal an extended period of keeping rates on hold. However, a ‘Table Mountain’ profile for rates is unlikely to prove sustainable as economic headwinds mount and underlying inflation pressures fade. We expect rate cuts to start by the middle of next year. There are two-way risks on this forecast, with an earlier and later start to cuts both plausible. 


Japanese H1 GDP growth displayed surprising strength, fuelled by robust inbound tourism flows that contributed to a positive trade balance. However, the anticipated payback in Q3 materialized with a notably weak performance in domestic demand growth. In September, both retail sales and industrial production fell below consensus expectations, reflecting the challenges 

faced by households grappling with higher inflation and businesses struggling to transfer increased costs to consumers. To address this situation, the government introduced a Y17 trillion fiscal package, incorporating tax cuts from June 2024 and extending energy subsidies until April 2024. These measures aim to support households during a period of subdued real wage growth before the upcoming Shunto wage agreements. 

Underlying wage still momentum weak 

In terms of inflation, leading indicators suggest robust Q4 inflation, driven by utility bills and pressure from the hospitality sector. However, the question remains whether wage pressures are strong enough to warrant further policy adjustments. Japan’s largest labour union is targeting wage increases of “more than 5%” in the 2024 wage rounds, compared to the previous target of “around 5%.” Yet, the realization of whole economy wages approaching 5% seems unlikely, given that August’s core earnings remained stable at just 1.6%. This implies that achieving a sustained re-anchoring of inflation at 2% remains a challenging objective for the time being. 

In terms of policy decisions, the Bank of Japan (BoJ) made an 8 to 1 vote to introduce flexibility to its yield curve control (YCC) settings in November. Shifting from a rigid cap to a “reference rate” of 1%, this adjustment is aimed at facilitating a smoother transition out of YCC. However, the BoJ is cautious not to be perceived as tightening policy prematurely. YCC is expected to remain in place until mid-2024, with the central bank emphasizing the significance of the upcoming spring’s wage negotiations before considering additional policy measures. Subsequently, we anticipate the BoJ to abandon YCC and raise the policy rate to 0% at that juncture. 


Official Q3 GDP growth surpassed expectations, and the monthly data has strengthened over the three months leading up to October, indicating a resilient and strengthening economy. Anticipated GDP growth for 2023 is expected to comfortably exceed the authorities’ 5% target. While real estate remains a potential factor that could trigger a crisis, we do not align with the more pessimistic viewpoints surrounding China. Despite the expectation that property might weigh on GDP growth in 2024 (projected at 4.4% compared to a consensus of 4.5%), recent policy easing, coupled with the potential for further measures, suggests that concerns about ‘Japanification’ may be exaggerated. 

Inflation does not pose a hindrance to additional easing in China. Headline inflation remains subdued, averaging only 0% over the past six months. Although core inflation is slightly higher at 0.7%, it still falls significantly below target-consistent rates. While base effects from energy are expected to push CPI inflation upward, our annual forecast for 2024 has been revised down to 1.4%. This adjustment is influenced by the supply-side-focused policy mix and the expectation of a somewhat subdued growth environment. 

Policy makers in China persist in implementing easing measures, employing a variety of monetary and fiscal tools with vigor. While there may be uncertainty about the effectiveness of these measures in significantly boosting growth and restoring market confidence, financial conditions have progressively shifted into a more accommodative stance. Further easing measures are anticipated, serving as a safeguard against downside risks. Additionally, untapped household savings provide a plausible avenue for potential upside surprises. 

Emerging markets 

We see emerging markets (EM) as one of the most mispriced asset classes globally. Despite a rise in absolute valuation levels since the fourth quarter of 2022, EM valuations remain generally inexpensive when compared to developed market (DM) equities. Valuation discounts relative to DM and US equities are currently around 30% and 40%, respectively, both wider than their long-term averages. China’s low valuations have significantly contributed to the sharp rise in the EM discount relative to DM. Excluding China, however, EM discounts are in line with the 10-year average. Presently, the price-to-earnings (P/E) ratio for the MSCI EM Index is approximately 12x over the next twelve months, slightly above its long-term average of 11.3x. 

Over time, and assuming no adverse geopolitical or economic events, we anticipate this valuation discount to narrow. This narrowing is expected to result from a combination of stronger earnings growth, a potential increase in EM profitability, where the return on equity gap between emerging and developed markets narrows, and a possible widening of the economic growth premium. EM economies currently enjoy an economic growth premium over DM, a trend not witnessed since the 2000s during the commodity super cycle. The MSCI EM Index’s dividend yields have been boosted primarily by energy companies in Latin America. 

Presently, global economic growth is moving in a non-synchronous fashion, leading to a more balanced global growth outlook. EM economic growth, driven by factors beyond China, is rising as DM growth slows. India is expected to benefit from a demographic dividend, with nearly 80% of its population younger than 50. Indonesia’s growth prospects are also improving as it ascends the metals value chain. Beyond Asia, Latin American countries like Brazil and Mexico have experienced improved growth on the back of nearshoring trends and increased foreign direct investment. In contrast, European growth has been relatively weak, reflecting the synchronized yet imbalanced nature of global growth. 

Despite EM being attractively valued, much capital has exited these markets in recent years, and many segments of the asset class remain markedly under-owned. EM showcases high and improving economic growth and financial productivity, as seen in return on equity, free cash flow yield, and dividend yield. In comparison to the developed world, earnings growth is expected to be higher in emerging markets in 2024, primarily driven by emerging Asia and information technology companies. 

In conclusion, we believe that EM presents an opportunity for investors, with the potential for valuation discounts to narrow over time. The diverse economic growth outlook, the demographic advantage in certain regions, and improved growth prospects in key markets make EM an intriguing prospect. Despite past capital outflows, the attractive valuations, coupled with high and improving economic indicators, position EM as a compelling asset class that may warrant a closer look from investors. 


In a dynamic start to 2024, traders are flocking to commodities at a pace not seen in over a year, seeking to capitalise on pivotal macro themes shaping the markets. Several factors are converging to create a perfect storm, making 2024 a historic year with far-reaching implications for global markets. 

Geopolitical and political events represent key risks for portfolios, but they are particularly difficult to position for. 

One of the key drivers is the anticipated peak in the U.S. dollar, prompting traders to explore commodities as an attractive investment. Simultaneously, escalating geopolitical risks, with ongoing conflicts in Europe and the Middle East, coupled with national elections in over 50% of the global economy, are setting the stage for the most significant election year in world history. With over 4 billion people set to vote, these events are expected to create market turbulence and opportunities alike. 

The global shift towards green energy and carbon-neutral policies is another major factor supercharging demand for essential commodities and rare earth metals. As nations commit to sustainable practices, commodities crucial to these initiatives are poised for increased demand. 

Notably, the anticipated shift away from aggressive interest rate hikes to substantial rate cuts throughout 2024 is drawing attention. According to Goldman Sachs, this sets the stage for a favourable scenario for commodities, presenting an opportunity for a stellar 2024. As central banks pivot, the potential for a classic commodities surge becomes increasingly evident. 


Gold prices are expected to go up in 2024, according to a Reuters poll conducted in October. The survey of 30 analysts and traders predicts a median forecast of $1,986.5 per troy ounce for 2024, compared to the expected $1,925 for this year. The forecast has slightly decreased since July when a similar poll anticipated an average of $1,988 per ounce in 2024 and $1,944.5 in 2023. 

The boost in gold prices is attributed to bets that global central banks will ease monetary policies, and the recent conflict in the Middle East has provided additional support to gold’s safe-haven rally, pushing it above $2,000. Respondents in the poll believe that heightened geopolitical tensions in the Middle East will continue to support gold in the short term. 

However, sustained challenges above $2,000 per ounce are not expected until Western central banks, particularly the U.S. Federal Reserve, adopt a more accommodative stance. While there is still an expectation that the Fed will cut by mid-2024, the latest poll indicates a decrease in support for this scenario, with only 50% backing it compared to over 70% last month. 

Gold, often used as a wealth preservation tool during times of economic and political uncertainty, experienced a notable increase of over 7% in October during the Israel-Hamas conflict, surpassing the key psychological level of $2,000 for the first time since May. Gold prices could trade anywhere between $1,800 to $2,200 in 2024. 


In the wake of an impressive performance in 2021 and 2022, the energy markets are facing a challenging 2024. The notable decrease in Brent and WTI crude oil prices, both experiencing declines of over 10% since the year’s commencement, sets the stage for a dynamic year. Various geopolitical factors, including Russia’s invasion of Ukraine, the U.S. presidential elections, and ongoing conflicts in the Middle East, add complexity to the energy landscape. 

Concerns about anticipated oil demand in 2024 and the surprising growth of U.S. shale oil operations contribute to the downward trend in oil prices. However, significant efforts are being made to counterbalance this trend. OPEC and its allies, for instance, have opted for voluntary production cuts totalling around 2.2 million barrels per day for the first quarter of 2024. 

The crucial question lies in whether other members will adhere to these cuts, impacting oil supply and prices. Should production decline significantly, and demand either remains steady or increases due to a robust global economy, an undersupplied oil market could emerge, potentially leading to a surge in oil prices. Goldman Sachs anticipates oil prices between $80 and $100 a barrel if the OPEC+ group adheres to the cuts. The ramifications extend beyond the energy sector, affecting inflation and, subsequently, monetary policy, influencing economic growth. 

Higher oil prices result in increased operational costs for businesses, potentially leading to a pass-through effect on consumer prices and triggering inflation. Central banks may respond with restrictive monetary policies, impacting interest rates and influencing the behaviour of consumers and investors. 

Amidst this complexity, a surge in oil prices benefits oil producers, providing increased revenues and financial leverage for strategic initiatives. As the OPEC supply cuts unfold, market participants anticipate volatility until concrete output cut figures emerge at the end of January, shaping the trajectory of the oil market. 

Agriculture commodities 

Supply conditions for agriculture and food commodities have seen improvements, with relatively stable agricultural prices over the past year, witnessing a modest 2 percent drop in 2023Q3 and a 3 percent decrease from a year ago. Despite larger declines in food prices (-6 percent), factors such as the non-renewal of the Black Sea Grain Initiative, India’s non-basmati rice export ban, and El Niño’s intensification have been offset by improved supply prospects for key food commodities like maize, soybeans, and wheat. Agricultural prices are projected to further decline by 2 percent in 2024 and 2025, following a 7 percent decline in 2023, due to ample supplies. 

However, despite abundant food supplies and decreasing food price inflation, food insecurity remains a significant concern. Despite a decline in food insecurity up to 2015, it has been on the rise, affecting over 900 million people in 2022. The recent conflicts in the Middle East, coupled with the Ukraine war, are anticipated to worsen food insecurity. Even before the latest conflict, 53 percent of the population in Gaza was already experiencing food insecurity. 


12 Month Forecast 

Economic and Political Predictions 



While we think the Aussie dollar should have an edge over other pro-cyclical currencies based on domestic factors and sharp undervaluation, external drivers – namely US yields, global risk sentiment and China’s economic outlook 



$US1800-/oz- $US2200/oz 

Gold’s investment appeal is on the rise. Falling US real rates and a weaker dollar should benefit the precious metal, even though its valuation is no longer attractive after a near 10-per cent gain this year especially in the wake of the Israel-Hamas war. 




We are constructive on commodities as key markets such as oil and copper remain finely balanced and are supported by limited inventories, producer discipline and/or supply shortfalls, with demand potentially benefitting from a China recovery or stimulus. 




Real estate values have been repriced throughout the year, due to the high interest rate environment and the macroeconomic outlook. Vacancies continue moderating but remain well below historical long-term averages across many property types. 

Australian Equities 


With a price-to-earnings ratio of around 17 times. Additionally, during the recent AGM season, there were more upgrades than downgrades of company guidance, indicating a positive sentiment among companies themselves. 


Begin to increase duration 

As interest rates stand at or near peak for most economies and inflation is likely to decline, albeit gradually and with volatility, some central banks are likely to start cutting interest rates, a process which has already started already in parts of the developing world. 

Cash Rates 

RBA to hold rates at 4.35% for first half. Then easing. 

Cash has appeal as a means of diversification and as a complement to the potential attractions of fixed income markets, and we maintain a moderately constructive view currently. 


Global Markets 



We look for a U.S. mild recession to begin in 2024. Economic growth will slow. And so will inflation – but not enough. Equity returns will be lacklustre 





Macro data stabilizing in Europe, but sector-neutral P/E (14x) at long term average and margins above pre-COVID levels. 

Bank of England looks likely to be the first major central bank to cut rates. The threat of recession could mean it starts to ease as early as May. 



Investors’ confidence in Japanese stocks has grown with measures by companies to improve their share valuations and corporate governance. Positive signals since last year that Japan’s economy was shifting from deflation – a trend of falling prices – to inflation have also acted as a catalyst. 

Emerging markets 

Start Buying 

Though we’re cautious of the impact of slowing Western demand on hardware producers in North Asia and materials producers in Latin America, we see an abundance of structural stock picking opportunities in India, Brazil, Southeast Asia, Greece, and Mexico. 



With MSCI China Index 2024 consensus earnings-per-share estimates projecting strong 14.2% growth and the market now being down for three consecutive years (not seen since the early 2000s tech bubble), we see room for a bounce 





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