2024 Semi-annual Market Outlook: Macroeconomic Overview
Monetary policy, global growth, politics and innovation have dominated headlines in 2024, and we expect these broad themes to continue to have an impact on markets as we head into the second half of the year.
Monetary policy & global growth
Although headline inflation has cooled, core inflation remains stubbornly above the 2% target set by most developed nations. There have been some signs that inflation is moderating, although the pace differs between economies.1 This may lead to greater divergence in interest rate policies, most notably between Canada and the U.S. as discussed in the Canadian Equity outlook.
Much of the positive investor sentiment that we saw to close out last year remains today. However, as we explain in the Fixed Income outlook, we believe that the “soft landing” scenario remains an uncertain outcome. There is also a real risk of a more volatile cycle as lower rates could re-introduce higher inflation, prompting central banks to revert back to monetary tightening, potentially leading to an economic slowdown. Policy remains highly data dependent, especially in the U.S. where data remains mixed, as described in the U.S. Equities outlook.
Politics
Around half the world was scheduled to hold elections in 2024. Many are completed, but there are still a number of them taking place in the second half of the year.
We have been closely monitoring the dramatic run-up to the U.S. presidential election, where President Joe Biden has announced he will be stepping down as the Democratic candidate and endorsed Vice President Kamala Harris to replace him at the top of the ticket. The news comes one week after Donald Trump, the Republican nominee, survived an assassination attempt at a rally in Pennsylvania. The outcome of the election is likely to have broad implications both domestically and on the international stage, and we will be monitoring the outcome closely.
Elsewhere, the Labour Party swept to power in the U.K. on July 4th, ending 14 years of Conservative rule, and as discussed in the Global Equities overview, the second round of elections took place in France on July 7th that saw a surprising victory for the New Popular Front, a left-wing alliance. French President Emmanuel Macron called a snap election following strong support for far-right parties in the European Parliamentary elections in early June.
Tarrifs and Trade
China and U.S. relations remain strained and are likely to deteriorate further following an announcement in May that the U.S. will increase many of the existing tariffs. This includes tariffs on semiconductors, which will rise from 25% to 50%, and electric vehicles, which will rise from 25% to 100% this year.2 Just one month later, the European Commission announced that similar tariffs will be applied to Chinese electric vehicles in the European Union as of July 4th, ranging from 17.4%-38.1%.3
Ukraine and the Middle East
The wars in Ukraine and the Middle East also continue to contribute to uncertainty, particularly around the impact on global shipping rates due to ongoing tensions around the Red Sea. However, lower rainfall is also reducing traffic through the Panama Canal, which could affect rates even further.
Innovation and the global transition to a green economy
We continue to monitor the key themes of electric vehicle sales, Generative Artificial Intelligence (AI) and renewable energy that were identified in our Empire Life 2024 Market Outlook.
Electric Vehicle Sales
Although electric vehicle sales continue to grow globally, sales continued to decline in the U.S. in the first quarter of 2024, registering the first quarter-over-quarter downturn in sales since 2020.4
Generative AI
The hype around Generative AI shows no signs of slowing, as OpenAI announced it has begun training the successor to GPT-4, increasing the training data to improve accuracy and the ability to act autonomously. This came the same week as an announcement that the company has struck a major deal with PwC, that will see the business advisory firm become OpenAI’s largest reseller and enterprise user.
Renewable Energy
Finally, we have been monitoring the global transition to green energy, with a particular focus on the potential role of nuclear energy in helping countries lower their carbon emissions. At the United Nations Climate Change Conference (COP28) in December of last year, 22 world leaders signed a declaration to make efforts to triple nuclear energy by 2050. We view this commitment as a positive step towards global energy security.
In this semi-annual update, we will take a closer look at these themes and events and explore how they may impact the different asset classes.
Download the full Empire Life 2024 Semi-Annual Market Outlook (PDF).
¹ Inflation Rate, Average Consumer Prices, International Monetary Fund, imf.org/external/datamapper/PCPIPCH@WEO/OEMDC/ADVEC/WEOWORLD, June 2024.
² “President Biden Takes Action to Protect American Workers and Businesses from China’s Unfair Trade Practices”, The White House Statements and Releases, whitehouse.gov/briefing-room/statements-releases/2024/05/14/fact-sheet-president-biden-takes-action-to-protect-americanworkers-and-businesses-from-chinas-unfair-trade-practices, May 14, 2024.
³ “Commission investigation provisionally concludes that electric vehicle value chains in China benefit from unfair subsidies”, European Commission Press Release,ec.europa.eu/commission/presscorner/detail/en/ip_24_3231, June 12, 2024.
4 “EV Sales Growth Slows; Market Leader Tesla Stalls”, Cox Automotive Data Point, coxautoinc.com/market-insights/q1-2024-ev-sales, April 11, 2024.
This document reflects the views of Empire Life as of the date published. The information in this document is for general information purposes only and is not to be construed as providing legal, tax, financial or professional advice. The Empire Life Insurance Company assumes no responsibility for any reliance on or misuse or omissions of the information contained in this document. Information contained in this report has been obtained from third party sources believed to be reliable, but accuracy cannot be guaranteed. Please seek professional advice before making any decisions.
Empire Life Investments Inc. is the Portfolio Manager of certain Empire Life segregated funds. Empire Life Investments Inc. is a wholly-owned subsidiary of The Empire Life Insurance Company.
Segregated fund contracts are issued by The Empire Life Insurance Company (“Empire Life”). A description of the key features of the individual variable insurance contract is contained in the Information Folder for the product being considered. Any amount that is allocated to a segregated fund is invested at the risk of the contract owner and may increase or decrease in value. Past performance is no guarantee of future performance.
® Registered Trademark of The Empire Life Insurance Company. All other trademarks are the property of their respective owners.
August 2024
