Welcome  to another edition of Vantage Point, the quarterly economic and markets outlook from the Global Economics and Investment Analysis (GEIA) team.

In this edition of Vantage Point we revisit key questions from a quarter ago regarding the need for a recession to reduce inflation sustainably, potential inflation rebounds, and the idea of peaked rates. While these themes persist, we've adjusted probabilities for 2024 economic scenarios. Firstly, there is an exploration of global ‘Immaculate Disinflation’ whereby inflation falls steadily back towards target almost everywhere without necessitating a recession.

Secondly, we investigate ‘Unavoidable Recession’ whereby leaving monetary policy too loose for too long during 2021-22 has had inflationary consequences that can only be solved by tightening monetary policy sufficiently to create a (mild) recession. Lastly, we explore ‘International Divergence’ whereby this economic scenario is a combination of the previous two, in which the US undergoes a soft landing of sorts, while Europe and the UK move into recession in early 2024. 

This quarter’s focus considers two key questions: firstly, how much economic slack is necessary to bring inflation back to target sustainably; secondly, are major economies diverging for the first time in two years? Despite rate hikes across the central banks, core inflation and labour markets pose challenges and point toward recessions consistent with our market outlook.

Whilst the US presents the possibility of a soft landing, economic differences are emerging among major developed economies. Various scenarios and investment strategies are discussed, emphasising cash, fixed income, and US equities.

Welcome to the latest edition of Vantage Point.

Another three months have passed, and still no sign of a major global recession. Economies and labour markets have held up better than expected, while inflation remains higher and stickier than central banks would like.  Overall, the outlook remains pretty cloudy. We have retained the same scenarios as last quarter, and the chance of recession sooner or later remains very high in a number of the major countries.

Welcome to the latest edition of Vantage Point.

The macroeconomic implications of the current turmoil are still unclear. But we believe that it is clear ‘something has broken’ in the move to a new, higher-rate world. So we focus on three scenarios that are distinguished by impact of the banking crisis, the underlying stickiness of inflation, and what that means for rates and asset prices.

Welcome to another edition of Vantage Point and our look ahead to 2023.

At the time of publication, risk assets have been rallying in the hope that inflation may come down quickly and a recession might be avoided in the United States. Inflation does seem to have fallen faster than expected in the past few months, though core remains worryingly high in all the major economies. Our sense is this relief rally may be somewhat premature and that rather more economic slack will have to be created before inflation heads meaningfully back towards target.

Welcome to another edition of Vantage Point. The world economy is in a precarious situation. There are a number of pressing issues but three stand out: the ongoing energy crisis, high core inflation, and the situation in China. Each affects the major economic regions differently. But together warrant a defensive approach to investing.

Welcome to the latest edition of Vantage Point. The past three months have seen a dramatic selloff of risky assets, driven largely by a recalibration of expectations of where global interest rates might be headed. Overall, the situation is not unlike the ‘overheating’ scenarios we described in several Vantage Points last year.