Partner Insight: How central bank policy could impact your portfolio

T.Rowe Price's 2024 Global Market Outlook Midyear Update

clock • 3 min read
Partner Insight: How central bank policy could impact your portfolio

All eyes on central banks

We are pleased to share our outlook for global economies and markets for the second half of 2024.

In the six months since we published our 2024 Global Market Outlook, the market environment has changed in many ways. Consensus expectations for central bank policy, in particular, are markedly different. Prices of interest rate futures reflect expectations for far fewer interest rate cuts from global central banks than seemed likely in December 2023. Equity and fixed income markets are readjusting accordingly.

The European Central Bank (ECB) kicked off the cycle of lowering rates by the major developed market central banks at its June policy meeting. But the path and magnitude of easing by the world's rate setters for the rest of the year is far from certain. This outlook details the factors shaping that path for the Federal Reserve (Fed) and other key central banks.

For the global economy, we anticipate broadening growth. While the U.S. remains strong, leading indicators elsewhere suggest that the narrative of U.S. economic exceptionalism may abate.

What does this backdrop mean for markets and asset classes? We expect a broadening in U.S. equity market performance and see attractive value in some international stock markets. Investors seeking to move out of cash may find attractive opportunities in shorter‑term bonds, as well as equities.

Most importantly, we believe the ongoing transition from the low rates that prevailed after the 2008–2009 financial crisis to an environment characterized by structurally higher interest rates will present favourable conditions for active managers to outperform.

Economy

Broadening global growth, resurgent inflation define outlook

Six months ago, the consensus outlook for the global economy in late 2024 featured steadily falling inflation amid a slide toward recession that would trigger aggressive central bank rate cuts. The best outcome would be a "soft landing" slowdown that dodged a recession thanks to central bank action. Investor hopes for this scenario led to simultaneous rallies in equities, high‑quality government bonds, and bonds with credit risk. What a difference a few months make: Consensus now expects continued expansion, resurgent inflation pressures, and limited easing from central banks. We're not quite as sanguine on growth as this "no landing" scenario, but it looks like recession is off the table for at least the next six months.

 

Important Information

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.

It is not intended for distribution to retail investors in any jurisdiction.

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