Q3 Global Market Outlook

Editor’s note: This article highlights insight from the Q3 2024 Santander Global Market Outlook.

The labor market continues to surprise investors

The labor market holds the key. Our analysis suggests a low probability of recession, with moderate interest rate cuts. This scenario depends on the balance between labor supply and demand, which will affect economic activity, and on wage pressures, which will determine the behavior of services inflation. In 2024, central banks are expected to lower rates, albeit in a moderate manner given that economies are at full employment and the urgency of rate cuts has decreased.

Strong labor market extends the current economic cycle

Despite 30 months of an inverted yield curve and peak restrictive monetary policies, there are no signs of significant job destruction. The moderate economic slowdown has been cushioned by fiscal stimulus and the strength of the labor market, despite the rise in interest rates. Excess savings accumulated during the pandemic are nearly exhausted, and household consumption now depends mainly on real income and employment levels. The final verdict depends on labor market dynamics.

Back to square one

The labor market has returned to its pre-pandemic equilibrium, with the major imbalances in supply and demand for jobs no longer present. If confirmed, this trend would lead central banks to move toward a more neutral monetary policy. Interest rate cuts are coming, but expectations for monetary easing are moderating.

Building a balanced investment portfolio

With monetary policy easing and a rebound in corporate earnings, a variety of investment opportunities are possible. If this economic outlook is confirmed, there continue to be several ways for investors to balance portfolios and position themselves across multiple markets. A wide range of options allows an investor to tailor portfolios to their specific risk/return needs.

Learn more by downloading the full Q3 2024 Santander Global Market Outlook now.

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