Executive Summary

Recent events. The early August global market plunge was influenced by a confluence of factors, including diverse monetary policy stances, the fragility of the US labour market, and lacklustre US big tech earnings. During such volatile market conditions, impulses often predominate over rational decision-making. Nevertheless, we anticipate a limited impact on the real economy and project a market correction as these sentiments wane.

It is premature to ascertain whether the recent turmoil in the global market will culminate in a full-blown recession, particularly within the US. The labour market is moderating steadily and predictably, not snowballing by any means. In any case, interest rates in advanced economies remain relatively elevated, affording policymakers ample elbow room to cut rates, whether aggressively or otherwise. In any case, we will monitor the situation closely and will duly update our forthcoming research notes and thematic reports.

Most of our reports require assessing data within a much longer time frame than we are experiencing. Therefore, events can overtake our analysis amid the rapidly evolving nature of the financial market, but we believe the substantial part of the report remains relevant.

This report consists of four parts: the global and regional economy, the prospects of the Malaysian economy, foreign exchange rate dynamics and the bond market outlook. This report highlights the first out of four reports: the global and regional economy.

Global economy. After years of grappling with post-pandemic challenges, the global economy has seemingly entered a soft-landing phase. While the IMF expressed optimism at the beginning of the year, the World Bank adopted a more cautious outlook for 2024 and 2025. In June 2024, the World Bank acknowledged that the global economy is stabilising but remained more pessimistic than other multilateral development banks (MDBs). As long as the fault lines remain under control, we believe governments can buy time to implement appropriate policies for better growth in 2025.

Major Economies. The United States (U.S.), the Euro Area, and China exhibit signs of cooling with no immediate recession risk. This situation may require a stabilisation policy through fiscal or monetary measures, but not both. Any policy measures to address growth-related concerns are likely to be less forceful than those implemented when combatting post-pandemic inflation woes. We anticipate the Federal Reserve (Fed), Bank of England (BOE), and the People’s Bank of China (PBoC) to each initiate end the year with a substantially lower policy rate. However, there may be more cuts if growth headwinds become more apparent as we enter 4Q2024.

Source: AmInvest Research - 9 Aug 2024