Where Will the Global Economy Land in 2024?

NEW YORK – Around this time a year ago, about 85% of economists and market analysts – including me – expected that the US and global economy would suffer a recession. Falling but still-sticky inflation suggested that monetary policy would grow tighter before rapidly easing once the recession hit; stock markets would fall, and bond yields would remain high.

The current baseline for many economists and analysts is a soft landing, where advanced economies avoid a recession but growth is below potential and inflation falls toward the 2% target.
An upside scenario is one with “no landing”, where growth remains above potential and inflation falls less than markets and the Fed anticipate.
A downside scenario is a bumpy landing with a short, shallow recession that pushes inflation lower, faster than central banks expect.

Instead, the opposite mostly happened. Inflation fell more than expected, a recession was avoided, stock markets rose, and bond yields fell after going higher.

One therefore must approach any 2024 forecast with humility. Still, the basic task is the same: start with a baseline, an upside, and a downside scenario, and then assign time-varying probabilities to each.