The global economy Is likely to slow but should avoid major disruptions.
In Europe, downside risks to inflation and growth have increased, pointing to a more front-loaded cutting cycle.
Rates
Global central banks have started the easing cycles but rates still expected to be “higher for longer” relative to history.
Credit
Strong backdrop for Investment-Grade Credit.
Emerging-Market Debt (EMD)
We see select opportunities in EM corporates.
Equity
Despite burst of volatility, equities ended the quarter higher.
Earnings growth expectations are improving outside of the US.
Macro
Rates
Credit
EMD
Equity
Macro
The Global Economy Is Likely to Slow but Should Avoid Major Disruptions
We Expect a Soft Landing for the Global Economy
GDP forecast (percent)
As of September 30, 2024
Source: Bloomberg, IMF and AB
Disinflation Should Continue
AB inflation forecasts (percent)
As of September 30, 2024
Source: Bloomberg, IMF and AB
What Are We Watching?
Key Upside Risks
Global labor markets remain strong; if the recent weakening is limited, growth may not slow much
Rapid rate cuts could boost financial markets, easing financial conditions
Key Downside Risks
Slower growth could spiral; monetary policy works with a lag, and rate cuts may be too slow or too small
Geopolitical risk continues to escalate
Current analysis and forecasts do not guarantee future results.
DM: developed market; EM: emerging market. Growth and inflation forecasts are calendar-year averages, except US GDP, which is forecast as 4Q/4Q.
*International Monetary Fund (IMF) global forecast as of October 22, 2024
Rates
Global Central Banks Have Started Their Easing Cycles, but Rates Are Still “Higher for Longer” Relative to History
Current Official Rates vs. AB Forecasts
Percent
As of October 21, 2024
Source: Bloomberg and AB
Current analysis and forecasts do not guarantee future results.
Credit
Strong Backdrop for Investment-Grade Credit
Net Supply Remains Low, While Demand Is Increasing
USD billions
As of September 30, 2024
Source: Bloomberg, J.P. Morgan and AB
Yields Are Compelling, While Spreads Look Tight
Percent
As of September 30, 2024
Source: Bloomberg, J.P. Morgan and AB
Tight Spreads Partly Explained by a Higher-Quality, Shorter-Duration Market
Years
As of September 30, 2024
Source: Bloomberg, J.P. Morgan and AB
Past performance does not guarantee future results.
IG: investment-grade; OAS: option-adjusted spread; YTD: year to date. Middle display average since January 1, 2000
EMD
We See Opportunities in Emerging-Market Corporates
EM Corporates Exhibit Lower Leverage than DM Counterparts
As of December 31, 2023
Source: Bank of America, Bloomberg, J.P. Morgan and AB
EM IG Corporates Offer a Spread Pickup over US IG
As of September 30, 2024
Source: Bank of America, Bloomberg, J.P. Morgan and AB
EM Corporate Sharpe Ratios Remain Attractive (2015–2024)
As of September 30, 2024
Source: Bank of America, Bloomberg, J.P. Morgan and AB
Current analysis does not guarantee future results.
bps: basis points; DM: developing-market; EM: emerging-market; IG: investment-grade; HY: high-yield
EM HY Corp. is represented by J.P. Morgan CEMBI Broad Diversified-HY; US HY by Bloomberg US High Yield; EM Corp. by J.P. Morgan CEMBI Broad Diversified; Euro HY by Bloomberg Pan-European High Yield; EM IG Corp. by J.P. Morgan CEMBI Broad Diversified-IG; EM sov. by J.P. Morgan EMBI Global Diversified; US IG by Bloomberg US Corporate Investment Grade; and Euro IG by Bloomberg Pan-European Aggregate Corporate.
Equity
Stocks Advanced Across Regions, but Sector Returns Shifted
Regional Returns*
July–September 2024, USD (Percent)
As of September 30, 2024
Source: FactSet, FTSE Russell, MSCI, S&P and AB
MSCI ACWI Sector Returns
July–September 2024, USD (Percent)
As of September 30, 2024
Source: FactSet, FTSE Russell, MSCI, S&P and AB
Past performance and current analysis do not guarantee future results.
China represented by MSCI China A, Australia by MSCI Australia, US small-caps by Russell 2000, emerging markets by MSCI Emerging Markets, UK by MSCI UK, Europe ex UK by MSCI Europe ex UK, US large-caps by S&P 500 and Japan by MSCI Japan.