1. Home
  2.  / Donald Trump, Vladimir Putin and the global economy

Donald Trump, Vladimir Putin and the global economy

In a year that will see half the globe summoned to vote, CMC Markets New Zealand general manager Chris Smith picks some of the stories to watch in 2024.

27 March 2024

Nearly half the world’s population will head to the polls to cast a vote in national elections in 2024. The United States, the European Union, India and Russia are just a handful of the 64 countries that will make this the year of elections.

Some of these elections will no doubt have a bigger impact than others, but as the votes trickle in around the world, investors will be watching closely to see which way things might go. For investors, the US election will be a marque event no different to 2020.

An election year always leaves investors debating the impact of policies on their strategy. This uncertainty ups the nerves of the market, and we are likely to see some moments of caution reverberate around the world. History shows the major moves tend to happen after the event, which makes sense with polling often unreliable.

But with the forecast of lower interest rates and inflation in 2024 and global economies potentially mastering a soft landing vs hard recessionary fears, there is also a sense of optimism underscoring the general mood. Governments do have a major challenge of the debt build-up from Covid, though, and how to pay that back with higher interest costs and a weary consumer.

All eyes on the US

No election will be watched more closely than the US presidential race in November. You essentially have a repeat of the 2020 election; each candidate divides the country vote, vying for control of the richest country in the world.

This race comes at a time when the US is still bouncing back after the economic strain of the last year, with high post-Covid inflation followed by a period of high interest rates.

As the months lead into the election, nerves in the investment community will grow. According to Reuters, Goldman Sachs has warned that the US election could be a “major market event”. Which comes as no surprise if we recall the Trump trade wars with China.

Other analysts suggest the election will ultimately draw attention to the policy platforms of the two candidates, with Trump campaigning on tax cuts and tariffs while Biden will likely continue environmental spending. Investors across the board will be looking closely at where the government money is most likely to flow under these two leaders and if they will ever look at cutting spending with constant debt ceiling votes.

Despite the impending uncertainty of the protracted US election, investors are currently betting on the US Federal Reserve easing interest rates this year and into 2025 as the cycle turns on monetary policy, leading to a strong start of the S&P 500 so far. The question now is whether the rhetoric coming from US politicians will ultimately squeeze the optimism out of that buoyant mood and cut away some of these gains.

The elephant in the room

The US isn’t the only country sparking intrigue around the world. Investors are also keeping a close eye on the globe’s most populous nation, India. Some analysts are suggesting that investors are currently in a wait-and-see pattern, wanting to gauge how things could proceed.

Indian politics can be notoriously tempestuous, but there are signs the next election could be a relatively predictable affair. Prime Minister Narendra Modi won three major state elections in December last year and is confident of also claiming a third term.

Modi has long had the support of India’s business class and tycoons across the country again heaped praise on him at the start of this year. Should the election go that way, bankers are predicting that we’ll see a continuation of the inflow of global capital into the Indian economy.

This would also have resonance in the local market, given Prime Minister Christopher Luxon’s ambitions to establish closer ties with India.

While the world has been keeping a careful eye on China’s dragon over the last decade, we are now also seeing the growing stature of India’s elephant.

Interest rates and inflation

All signs point to inflation and interest rates tracking down throughout 2024, with the market applauding these forecasts and watching key data closely on timings. Locally the market is forecasting August for the first easing along with Australia’s RBA in August.

The problem with predictions of this nature is that they are still subject to the illogical whims and fancies of global events. In the past year we’ve seen global climate catastrophes, war at the doorstep of Western Europe and increased bloodshed across the Middle East.

The spectre of geopolitical tension has risen to again dominate the global debate. And because of our reliance on global supply chains and international markets, events elsewhere have a greater impact than ever on what’s happening in New Zealand. At this stage, we can only hope that 2024 is not quite as tumultuous as the last few years have been.

AI on your iPhone

Beyond the geopolitical rumblings and the election bonanza, artificial intelligence remains the topic du jour in business circles.

Behind the scenes, Apple has been on an acquisition streak to improve its capability in this space, and we’ll start to see what Apple’s involvement will be later in 2024.

The integration of generative AI into iPhones will mark an important tipping point in the impact of this technology and how it can be mass used. Microsoft has started rolling out a subscription model called Co-Pilot (chat GPT) into its product set.

Placing generative AI into the hands of consumers via the digital device they use most frequently will lead to an exponential rise in the practical application of this technology.

This could quickly lead to new opportunities ripe for clever innovators to capitalise on. We’ll likely see a few listed companies burgeon as they latch onto these opportunities, but it always pays to proceed with caution. The key will be separating the fads from businesses that could drive longer-term growth for shareholders.

Informed Investor's content comes from sources that Informed Investor magazine considers accurate, but we do not guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk.


Related Articles