A softening global outlook in 2024 follows a year of stronger than expected growth and market performance as tailwinds to the consumer fade and monetary policy tightening lags catches up. A soft-landing consensus has taken precedent over last years recession fears, although we can’t discount the possibility completely yet. Inflation is steadily coming down to central bank target levels, but there remains headwinds to core levels. With inflation seemingly on track, markets and central bankers are now as close to agreeing on the policy path since the start of the cycle. Roughly 100bps of cuts are likely coming in most major markets, however, in the medium term will still be comparatively elevated to the ultra-low levels we became accustomed to post global financial crisis. Additionally, geopolitical tensions remain highly elevated and a continued risk to the outlook.
The UAE economy continues to be a global bright spot, while ADX lagged an otherwise fantastic year for global equity markets (including DFM), the local
macro environment appears conducive of positive corporate performances.
Dealmaking activity should cautiously re-emerge as pressure builds to deploy accumulated dry powder and the valuation gap narrows. However, tighter
credit conditions in the medium term will require adaptation with an emphasis on operational improvements to current holdings and less leverage.
Sluggish deal flow and IPO recoveries will weigh on exits, extending liquidity issues and increasing demand for carveouts.
Investors will need to roll up their sleeves to weed through a dispersed landscape as divergences emerge in growth, earnings and valuations across
regions and sectors. Conditions call for increased selectivity and a premium on quality. Caution should be placed on cyclical areas of the market that
benefited most from post-pandemic volatility and stimulus as those forces fade. Identifying mega forces (persisting structural themes causing current
and long-term shifts in economies, sectors and profitability) can allow investors to cut through macro cycles and market volatility.DOWNLOAD