So far this year US activity data has continued to be on the strong side of consensus, supporting the view that the economy may not be slowing as much as many had started to believe. This report highlights the key signposts we are watching to confirm a relatively gradual deceleration in the US economy, in line with our base case for a soft landing.

Australia’s headline CPI rose by 0.6% in the fourth quarter, below consensus expectations of a 0.8% increase. While inflation is still too high, this inflation result is a welcome outcome after many quarters of very high inflation and the previous quarter’s upside surprise.

Global equities have eased back in January after last year’s late surge. The first few months of 2024 could be characterised by range trading as excessive optimism is worked off as central banks hold the line on interest rates. However, equities should ultimately benefit from rate cuts later in the year, lower bond yields and the anticipation of stronger growth late in the year and in 2025.

Global equities have delivered strong returns this year, led by the tech-heavy US market. Both the US economy and the US earnings cycle have been better than feared. In this report, we discuss how these and other factors play into the investment market outlook for 2024.

Amidst a climate of heightened confidence, risk assets are rallying, underpinned by a broader improvement in global risk sentiment. Investors are increasingly optimistic that policymakers will orchestrate a soft landing in 2024, a sentiment that gains support from recent economic data releases.

US equities have staged a strong revival this month bouncing back to within 1% of their late July highs. A more benign macro outlook has been the primary catalyst for the bounce-back with recent evidence that the resilient US economy is cooling gradually.

Despite calls for structurally higher inflation, US headline CPI appears to be falling as fast as it went up. This should provide support for both fixed interest and equity markets over the coming year.

While a number of the world’s major central banks have recently hit the policy pause button (most notably the US Fed), the Reserve Bank of Australia lifted rates 25 basis points to 4.35% last week.