Europe is sluggish, the US is dynamic and China is ready to bounce back
According the analysis, the latest economic indicators show slow growth in the eurozone at the end of 2023, while the American economy remains dynamic.
This disparity can be partly explained by the nature of the measures taken by governments since 2020. In the United States, the adopted measures have led to an excess of demand, contributing to the return of inflation. In Europe, the policies implemented were mainly aimed at preserving activity in the face of the health and energy crisis.
In China, industrial activity is gradually returning to its pre-Covid-19 crisis trend, although the real estate sector remains a stumbling block. However, it should be emphasized that the Chinese authorities seem to view favorably the ongoing cleanup process after past excesses.
Uncertainties for 2024
Underlying inflation remains significantly above the targets set by central banks. Investors are anticipating a drop in rates starting from early spring, both from the FED and the ECB, with a total decrease of about 150 basis points. However, it remains possible that central banks will be more cautious than expected, which could lead to a short-term market correction.
Indeed, the sharp drop in long-term rates has supported stock indexes at the end of 2023. But the outlook for 2024 raises many questions. The concerns mainly focus on the risks of job market deterioration and companies' resilience to environmental shocks. Still, disinflation could favor household consumption, which was the weak link in European growth in 2023. Perhaps the lower than expected long-term rates will limit the adjustment of real estate markets.
It is important to underline that despite expectations, geopolitical hazards present in an unstable world can always have a significant impact. The tensions in the Red Sea and their consequences on maritime shipping between Asia and Europe are a concrete examples.
