Market Analysis and Investment Insights

Iran’s direct attacks on Israel via missiles and drones is a material escalation of an intensifying regional conflict. For markets, the event was well-anticipated and the initial reports of casualties from the bombardment were few. This may limit the response in financial markets, with crude oil still likely to have a large initial move.

This was the first direct state-to-state attack between Israel and Iran after the events of October 7, 2023. This changes the parameters of the regional conflict. In such events, the initial reaction is very often an “overshoot.” The oil price - a key metric for global impact – typically moves as a multiple of any feared production loss, followed by a drop.

Tragic military conflicts and global growth have co-existed through most periods. While markets will recalibrate future risks over the coming days, rarely do such events change the direction of the world economy.

Resigter now to listen to the latest CIO views on Veracast.

The Fed revised up its 2024 US growth forecast similar to our revision last month.

While such forecasts almost never capture turning points, a key policy message is the Fed’s projection that it expects to cut the Fed funds rate from about 5.4% at present to 3.1% even while expecting uninterrupted economic growth during the next three years.

Other Developed Market (DM) central banks also appear set to ease monetary policy around mid-year: The Swiss National Bank acted early last week. The Bank of Japan raised its policy rate above zero, if barely, for the first time in 17 years. Markets took the latter news in their stride.

Rising global food insecurity has come under the spotlight following a series of geopolitical shocks, including the COVID-19 pandemic and Russia’s invasion of Ukraine. Food security concerns have also been compounded by the effects of a shifting climate and increasing evidence of damage caused by accelerating biodiversity loss and water scarcity. Amid concerns about immediate and long-term food security, agriculture policies are caught in the crossfire between short-term food security and sustainability.

• October 2023 price is gone, the opportunity remains.
• Markets still price in too high a probability of a March rate cut, in our view. Still, 150 bps of cuts expected in 12 months is not extreme.
• What has happened since OL24: Junk rally amid dovish Fed turn.
• How’s the broadening trade going?
• Health Care: the anti-obesity craze won’t stymie innovation.
• Yield curve is now very flat, and positively sloped between intermediate-to-long dated maturities.
• Intermediate IG still offer attractive “real” yields vs expected inflation with yields of about 5.15% for duration of about 4 years.
• USD: The recent squeeze up in DXY may partly be due to a rise in risk aversion related to the Middle East.
• Presidential Year Stock Market Returns.
• Market-cap vs Equal-weighted S&P 500 Over Time.
• China’s equity performance is uncorrelated with its GDP growth, while the property market has acted as a key source of wealth generation since 1997.
• Japan – Profitability, Investor Inflows, Currency Kicker.

Egypt’s journey towards economic stabilisation and growth has been recently marked by significant developments, including a historic interest-rate hike by the Central Bank of Egypt (CBE), a currency floatation leading to a drastic devaluation of the Egyptian pound, and a much-needed $8 billion loan agreement with the International Monetary Fund (IMF). These measures, essential for meeting the IMF’s longstanding demands for economic reform, aim to attract foreign investment, manage inflation, and ultimately strengthen Egypt’s financial stability.

Stay updated on key global market developments and Citi's house views on the latest headlines. Find out what's trending through our comprehensive market research reports and in-depth thematic articles.

**Please note that you will be leaving the Citi UAE website.