In its recently released outlook for 2024, Bank of America (BofA) Global Research anticipates a global shift to rate cuts, predicting that disinflation will continue and both the Federal Reserve and European Central Bank (ECB) will begin cutting rates in the latter half of the year. BofA economists and strategists expect that the rate hikes observed over the past 18 months will ultimately weaken growth and lead to higher unemployment levels. However, they foresee a soft landing rather than a recession.
Reflecting on the unexpected developments of 2023, Candace Browning, Head of BofA Global Research, noted that the year defied expectations of recessions, unrealized rate cuts, stable bond markets, and rising equities that challenged cautious investors.
BofA's key calls for 2024 include a global shift to rate cuts, with Claudio Irigoyen, Head of Global Economics at BofA, anticipating a gradual decrease in global inflation. This trend is expected to enable many central banks to implement rate cuts in the second half of 2024, preventing a global recession.
Further, Michael Gapen, Chief US Economist, predicts the first Federal Reserve rate cut in June 2024, while the ECB is expected to cut rates by 25 basis points per quarter in the same year.
Chief Investment Strategist Michael Hartnett believes that the bull markets of 2024 will be in bonds, bullion, and market breadth. Hartnett suggests that the risk of a hard landing for the economy is higher than expected, and he is closely monitoring factors such as bearish investor positioning, recessionary corporate profits, and policy easing.
While BofA envisions a soft landing, it acknowledges that downside risks may outweigh upside ones in the current economic landscape.
