How do investment banks view record election year 2024?

In 2024, many elections will take place in the world political scene, especially in the US. The elections are expected to have critical consequences for the course of global markets. So how do market players see the election year of 2024? In 2023, we witnessed the highest inflation and monetary tightening of the last 40 years. Although they have eased somewhat compared to 2023, 2024 will be a year in which financial conditions remain tight, global growth slows, and national politics and global geopolitics decline even further. According to The Center for American Progress, more than 2 billion voters in 50 countries will go to the polls in 2024. The total population of these countries is approximately 4.2 billion. These countries, which make up more than half of the world's population, also produce more than 50 percent of the global economy. There is increasing dissatisfaction with political systems on a global level. Trust in state institutions that have difficulty solving economic and political problems has decreased. International institutions from the post-World War II era are losing credibility. Their existence has come into question. In the West, immigrants are no longer seen as a humanitarian issue but as an existential threat. The far right and far left have begun to attract more attention from the center. Political polarization is increasing. Populism is gaining strength. People’s tolerance has decreased. This is the biggest threat to democracies. It is becoming increasingly difficult to maintain peace. We are entering a period in which it will be difficult to establish stable and long-lasting governments. The current environment will affect both the ballot boxes and the ballot box results. Cyber and digital threats cannot be ignored. Social media platforms have become the primary source of information. Voters are more open to manipulation through disinformation than ever before. Artificial intelligence content can be very effective. Reliable information is essential for democracy and the market economy. Accurate and complete information is a must for the conscious voter and the conscious consumer. ‘Deepfake’ audio and video are the enemy of reliable, complete and accurate information. Democracies derive their power from the legitimacy of elections. Without justice, there will be no peace, no stability, and no environment of trust. BRICS (China) and the West (USA) competition, Russia-Ukraine War, Israel's Gaza atrocities, global warming (2023 will be the hottest on average in history, the record may be broken again in mid-2024 due to El-Nino), transition to multi-year low growth in China, growing 'hostile' trends in international economic relations, lawlessness, redesign of globalization and supply chains, geographical winners and losers in terms of developing countries, increasing geopolitical fragmentation, changing global macroeconomic regime, uncertainty, high volatility that often accompanies it, increasing risk premiums... According to the latest "Chief Economists' Outlook" report of the World Economic Forum, if we were to summarize 2024 in one word, that word would be "volatility". Again, according to the report, one of the biggest sources of this volatility will be geopolitics. Our question is: Can we read this entire turbulent process exclusively from the perspective of the extremely dovish Fed pricing? Which election is critical and why? We can summarize the critical aspects of the elections that will stand out on the world political stage in 2024 as follows: Taiwan elections (January 13): South China Sea, straits, US-China tension, chip supply… Russian elections (March 15-17): Ukraine War, food, energy, armament and nuclear threat… European Parliament elections (June 6-9): EU Budget, green transformation, difficulties in decision-making processes, divergence in foreign policy, EU enlargement, immigration policy, political polarization, aid to Ukraine and Gaza… How will European public opinion evolve? Will a new, inclusive and visionary leadership emerge? UK elections (December 17 at the latest): Atlantic Pact, relations with the EU, support for Ukraine… Indian elections (April-May): Is a new source of production and demand emerging to replace China? Food exports, food prices… US Elections (November 5): Could there be a candidate other than Biden and Trump? What happens if Biden leaves and Trump comes in? Globalization, supply chain, international institutions, China, BRICS, relations with Russia, Ukraine War, OPEC, NATO, EU, relations with the United Kingdom, Middle East, Israel… Apart from these, there are many elections in Belgium, Bangladesh, Pakistan, Indonesia, South Africa, Mexico and many more that may have critical results. Elections mean uncertainty for stock markets. Volatility increases as we move towards the unknown. If the results are accepted and adopted without questioning the legitimacy after the elections are over, uncertainty decreases. In the following year, stock markets generally rise. How do investment banks see 2024? While all these elections are expected to pave the way for the critical developments above, what are the scenarios of market actors? Goldman Sachs Macro The global economy performed above our optimistic expectations in 2023. Global economic growth will grow 1 point above our consensus estimates from a year ago. Major central banks have probably completed their interest rate hikes. We expect a further decline in inflation in 2024. The risk of recession is limited. If growth slows down, central banks have high margins and willingness to make insurance interest rate cuts. No rate cut before the second half of 2024. The Bank of Japan (BoJ) will relinquish control of the yield curve in the spring. China’s slowdown continues. The US dollar could remain strong. Goldman Sachs Asset Management Tech innovation and artificial intelligence will continue to be important. There was $18 trillion in negative-yielding bonds in 2020. Now it’s almost zero. Good companies have bond yields of between 4% and 6%, twice as high as the 1999-2019 average. Private sector companies with investment grades or above from Fitch and S&P have an average bond yield of around 8%. The perception of “no alternatives to stocks” (TINA) for decades is giving way to a “reasonable alternatives” (TARA) approach. Sovereign bonds with investment grade ratings and private sector bonds with investment grade ratings have become alternatives to stocks in both the US and Europe. BlackRock As I quoted above, the redesign of globalization, increasing geopolitical fragmentation, and the redesign of supply chains will be closely monitored. There will be a transition from concept to commercialization in artificial intelligence. Corporate artificial intelligence applications will accelerate. Accelerated computing and new technologies will come to the stage. Pay particular attention to medical innovations. Artificial intelligence-supported healthcare services were $9 billion in 2022. This market will increase to $188 billion in 2031. When UBS looks at 2024, we see 3 question marks: How should investors adjust their portfolios in a slowing growth environment? What is the outlook for the technology sector, which performed very well in 2023? How should investors position themselves? What will the movements in the bond market mean for stocks? Emphasis should be placed on well-positioned, cyclical companies with strong balance sheets and cash flows. IT companies, smartphone, PC tablet companies and artificial intelligence companies look interesting. The decline in bond yields may support stocks. JPMorgan There will be a soft landing in the US. Strong growth will continue by cooling down. We have seen a serious decrease in inflation. However, there are still risks. The Fed interest rate hike seems to be over. Don't stay in cash. We like US local government bonds. There could be an opportunity in commercial real estate. BNP Paribas Low growth in 2023. Pandemic savings in the US will soon be spent. Business investment will decline. China will grapple with a real estate crisis. Europe is more vulnerable to recession and at risk of stagflation. Tight financial conditions will weigh on economic growth and corporate profits. Governments will focus on debt reduction. Fiscal support will reverse. Growth falling short of market expectations is a key risk. Barclays The geopolitical backdrop is increasingly worrisome. Economies will continue to face headwinds. Investors should be mindful of uncertainty and the volatility that often accompanies it. 2024 is harder to predict than 2023. We continue to believe the recession argument is wrong. We expect a year of low growth, flirting with contraction, and gradually easing inflation pressures. Nordea Despite the highest interest rates in the Western world in 15 years, there was no hard landing. Uncertainties persist. Most countries’ industrial sectors are struggling. Geopolitical tensions have not eased. Europe is on the verge of a recession. A soft landing is still possible but less so compared to the US. The final word While evaluating BIST, Eurobond, private sector bond and DİBS yields and yield expectations, we should not forget the alternatives written under the "Goldman Sachs Asset Management" view.