A Breakdown of LGT’s Global Economics Forecast for 2024

A Breakdown of LGT’s Global Economics Forecast for 2024

During a recent briefing with valued clients and the press, Stefan Hofer, Chief Investment Strategist at LGT Private Banking Asia, and Ekkapob Makeguljai, Chief Executive Officer – Thailand – LGT Private Banking, shared LGT’s insights into the global and Asian economic outlook, as well as investment strategies for 2024.

LGT Group, owned by the princely House of Liechtenstein through the Prince of Liechtenstein Foundation, stands as the world’s largest royal family-owned private banking and asset management group. With a rich history spanning over 90 years, LGT is a leading international player in the field, managing assets totaling US$ 341.8 billion for high-net-worth individuals and institutional client. Operating globally, LGT has a workforce of over 5,000 across 25 locations in Europe, Asia, the Americas, Australia, and the Middle East.

According to LGT, in 2023 investors experienced a better-than-expected year, but 2024 poses several challenges due to elections in key economies like India and the USA. The US economy is anticipated to slow down without entering a recession, with the last two quarters showing more favourable signs. LGT is advising investors to consider less risky options like US investment-grade corporate bonds, especially in the first half of 2024. As interest rates are expect from summer onwards, LGT foresees a shift towards stock market investments, reflecting growing confidence in an economic rebound. Regarding the upcoming elections in India and the US, LGT expects minimal changes to India’s economic policy, while the US might undergo tax and policy adjustments.

The United States of America

Despite the unprecedented surge in US interest rates in 2023, LGT maintains optimism, foreseeing a “soft landing” for the economy in H1 2024. With successful measures from the US Federal Reserve to control high inflation without inducing a recession, LGT cites the low unemployment rate and sustained demand for certain job sectors such as construction. Anticipating a 2% real growth in the US economy in 2024, LGT predicts a return to the 2% inflation target by Q3 2024, prompting potential interest rate cuts by the Federal Reserve in mid-2024. LGT advises focusing on bonds for profit in Q1-2, transitioning to stocks in Q3-4 due to inflation concerns, highlighting core inflation as the biggest key risk for investors.

Overall, LGT has reaffirmed that the US is in a favourable position, driven by robust real estate developments and job opportunities in various industries, defying expectations amid higher interest rates. It is evident that the US government plans to sustain spending until 2025-2026, and despite concerns about the fiscal deficit, the central banks are retaining the dollar. Investors are advised not to worry and are recommended to hold onto their dollar and consider buying Euros, with the Japanese yen being particularly favoured for potential gains.

Europe

Europe is expected to face considerable challenges in 2024, with recessions in Germany and Italy in 2023 attributed in part to a decline in export orders from China. Despite this, the Eurozone’s unemployment rate remains low, and the labour market has been deemed healthy, thanks to a backlog of manufacturing orders post-pandemic. LGT anticipates a modest cyclical rebound in Europe in 2024, supported by decreasing interest rates.

Japan

The Japanese economy faced stagnation at the close of 2023, grappling with natural disasters and political uncertainties. LGT acknowledges these as short-term hurdles, maintaining a positive outlook for Japanese companies and investments throughout the full 2024 year. Corporate governance reforms have led Japanese companies to prioritise shareholder returns, resulting in record-high profits, supported by a weakened yen in 2023. Moreover, notably there are indications of increased consumer and asset prices. Anticipating a shift from deflation to inflation, LGT foresees strong profitability for Japanese companies in 2024. The recommendation is to buy yen and invest in the Japanese stock market to capitalise on the emerging economic era. Despite long-term challenges, particularly demographic factors hindering growth, 2024 appears promising for profits in Japan.

India

LGT has identified India as its second most preferred market in Asia, citing the government’s substantial investments in physical infrastructure. The focus on roads, bridges, railways, and airports is expected to propel India’s GDP growth by at least 6% in real terms in 2024 and higher in 2025. India leads the list of fastest-growing markets, notably in industries like automobile manufacturing and sales. The influx of international investments observed in 2023 is anticipated to persist in the current year. However, it is important to note that one limitation for investors is that India’s stock market is not inexpensive.

China

China’s economic growth for 2024 is projected to be modest, around 5%, primarily due to challenges in the housing market that are expected to persist until 2025. The property sector is grappling with falling prices, and it is anticipated to take 2-3 more years for China to overcome these real estate challenges. Valuations of Chinese equities are currently at long-term lows, prompting investors to consider re-entering the market in anticipation of substantial stimulus measures. Despite this, China’s economic growth trajectory is shifting to a more restrained pace, marking the end of the years of high growth and boom experienced by the country.

Thailand

LGT anticipates a 3% growth in Thailand’s GDP for 2024, fuelled by a gradual recovery in tourism and international investments in the industrial sector. Rising consumer confidence, partly attributed to expected fiscal easing (THB 560 billion), has also been noted. Inflation in Thailand is projected due to government subsidies, but discussion suggested that the Bank of Thailand may follow global trends by cutting rates, considering domestic economic growth. The Bank of Thailand might also pre-empt the US Federal Reserve in cutting interest rates.

In the export market, Thailand’s exports to the USA remain positive, however, China has seen the most success over the last two decades as the country leads in both manpower and necessary infrastructure. Moving into this year, tariffs on Chinese goods imposed by the US government pose a challenge, with Mexico expected to regain the number one spot. While Thailand continues to diversify its export market, stiff competition arises globally, particularly from the aforementioned countries and India, especially in the technology sector.

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