High interest rates, a slowdown in China and a possible Trump victory could make for a rocky year

The global economy was full of surprises in 2023. Despite the sharp rise in interest rates, the US successfully avoided a recession, and major emerging markets did not spiral into a debt crisis. Even Japan’s geriatric economy exhibited stunning vitality. By contrast, the EU fell behind, as its German growth engine sputtered after China’s four-decade era of hypergrowth abruptly ended.

Looking ahead to 2024, several questions loom large. What will happen to long-term inflation-adjusted interest rates? Can China avoid a more dramatic slowdown, given the turmoil in its real estate sector and high levels of local government debt? Having maintained near-zero interest rates for two decades, can the Bank of Japan (BOJ) normalise rates without triggering systemic financial and debt crises? Will the delayed effects of the Federal Reserve’s interest rate rises eventually push the US into a recession? Can emerging markets maintain stability for another year? Last, what will be the next major source of geopolitical instability? Will it be a Chinese blockade of Taiwan, Donald Trump winning November’s US presidential election, or an unforeseen event?