As economic risks decline, policy risks rise

This year has been remarkable in many respects. Economic growth in the US and parts of Europe exceeded expectations. US Inflation – which had been accelerating – appears to have resumed  its downward trend. Inflationary pressures in Europe have subsided sufficiently for some central banks to have started their easing cycles. Equity markets have reflected these favourable developments. 

When good news isn’t good

The US economy has defied all expectations over the past year.  A much-anticipated recession in 2023 never materialised. The economy accelerated in the last quarter of the year. So far in 2024, the economy appears to be growing at a healthy clip of 2.5%. Unemployment is at exceptionally low levels. Growth in employment has been exceeding expectations, while job openings continue to exceed the number of unemployed people. This should all be good news.