KKR Releases 2024 Mid-Year Global Macro Outlook
In “Opportunity Knocks,” McVey and his team explain why they believe the current economic cycle has further to run, despite an environment of heightened volatility and political complexity that they envision in the second half of 2024. They also note that diversification and ability to dynamically lean into dislocation will be critical to successfully capitalizing on the compelling investment opportunities that this environment presents. Several factors underpin the team’s constructive outlook, including an encouraging technical backdrop, a belief that we have entered a structurally higher level of productivity in the
In the piece, McVey and his team present high conviction asset allocation picks and pans and important investment themes that they believe can serve as foils in today’s uncertain landscape, including accelerating AI demand for electricity, reorientation of global supply chains, improving labor productivity, and retirement security. They also highlight several notable updates since their 2024 Outlook:
- Stronger conviction in the importance of owning more non-correlated assets, given a flatter frontier for expected returns amidst heightened portfolio volatility.
- More pronounced mismatch between energy supply and demand given electrification needs and the growth of energy-intensive users such as data centers, semi fabs, EV battery plants and steel mills.
- Broadening of earnings growth across sectors and geographies, which we expect will bring more balance to the equity markets.
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More sustained deficits amidst election volatility, which reinforce our Regime Change thesis and continued belief that the deficit will stabilize at historically wide levels under either
U.S. presidential administration. -
Greater focus on the positive path for productivity, especially in the
U.S. - Unprecedented demand for worker retraining, as companies seek to fill high-skilled jobs left open by COVID-era retirements as well as ongoing technological advancements.
McVey and his team also make a number of out-of-consensus calls, which include:
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Above consensus estimates for GDP growth in 2024 across all regions, including 2.5% for the
U.S. , 0.8% forEurope , 5.0% inChina and 0.6% inJapan . -
Less concern about a lower
U.S. savings rate, given the impact of aging demographics on savings rates. -
Above consensus on long-term interest rates in the
U.S. andEurope , given our higher for longer inflation thesis. - We believe we are likely to see better earnings per share than the consensus, powered by margin expansion, and as a result, remain above consensus in our price target for the S&P.
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We expect oil prices to settle in the mid
$70 -80s range in 2024 and our longer-term forecasts remain well above futures. - Our base view is that there is an asymmetric risk for the economy and markets if rates go higher versus lower. We also see the currency and labor markets as potential sources of volatility.
In addition, the report details the GMAA team’s updated views on global growth, inflation, interest rates, commodities, currencies, and the capital markets. The report also addresses key investor queries on topics such as relative value, inflation, the
Links to access this report in full as well as an archive of
- To read the latest Insights, click here.
- To read the 2024 Outlook, click here.
- For an archive of previous publications please visit https://www.kkr.com/insights.
About
About KKR
KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR’s insurance subsidiaries offer retirement, life and reinsurance products under the management of
The views expressed in the report and summarized herein are the personal views of
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Julia Kosygina
212-750-8300
media@kkr.com
Source: KKR