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MarketScape · 01.22.24

2024 Investment Outlook: Falling Inflation and Rates, Rising Political Risk

Rate cuts and lower inflation likely will accompany slower economic growth and a rise in global political risks in 2024 — meriting some caution on equities.

  • Markets & Economy
  • Multi-Asset Insights
  • Fixed Income Insights
  • Equity Insights

Key Points

What it is

We give our take on the forces likely to move markets this year: the economy, inflation, central bank rates and global political risks.

Why it matters

A slowing economy and political tension could spark volatility, but falling interest rates and inflation may support markets.

Where it's going

U.S. equities appear somewhat pricey for a slowing economy, meriting caution by investors. We see central bank cuts around mid-year.

In 2024, we see inflation and interest rates declining across the globe, and a resilient U.S. consumer likely  helping to  avoid a recession. Global political risks have risen with the growing conflict in the Middle East and continued war in Ukraine. Further, political polarization is driving contentious elections worldwide. European stocks face a challenging environment and U.S. equities, though more promising, appear expensive. As a way to help manage these risks, high yield bonds could prove a good fit for 2024. Let’s take a closer look.


Lower inflation will likely trigger the reduction of interest rates globally in 2024.  Supply-chain disruptions from the pandemic have largely ended, causing goods-related inflation to retreat. However, housing-related inflation and wages continue to rise, contributing to stubborn services inflation. We expect that housing related inflation will likely soften this year, triggering an overall reduction in U.S. inflation. U.S. rate cuts may start around mid-year. European central bankers likely will want to be certain of having conquered inflation before reducing interest rates. Meanwhile, U.K. inflation risks remain elevated. 


Forward-looking markets responded to declining inflation and the promise of AI with a global equity rally last year. While US large caps surged more than 26% in 2023, earnings stayed flat, and therefore expanded. Thus, U.S. large caps merit some caution. Global markets followed a similar pattern, though to a lesser extent.


Declining inflation and rate cuts will likely come with a slowing economy and political unrest that may globally. In this environment, high-yield bonds look promising as credit quality is high and default risks remain low..

Main Point

Keeping an Eye on Risks in 2024

We expect lower inflation, central bank rate cuts and a soft economic landing to support markets this year. But with a slowing economy and tense global politics overhanging the market, we believe 2024 will especially reward investors who manage their portfolio risks well.

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Anwiti Bahuguna, Ph.D.

Portfolio Manager

Anwiti Bahuguna, Ph.D., is chief investment officer of global asset allocation for Northern Trust Asset Management. She is responsible for managing investment performance, process and philosophy for multi-asset strategies globally. Anwiti leads NTAM’s strategic asset allocation, tactical asset allocation and capital market assumptions, and oversees the portfolio construction group and multi-manager business.

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