Market Outlook 2024 | J.P. Morgan Research

Geopolitical risks also remain high, with two major conflicts currently ongoing and national elections soon taking place in 40 countries, including the U.S. As such, equity volatility is expected to generally trade higher in 2024 than in 2023, and the extent of the increase depends on the timing and severity of an eventual recession.

“While it is difficult to pin down the start date and depth of a recession ahead of time, we think it is a live risk for next year, even though investors are not pricing in this uncertainty consistently across geographies, styles and sectors yet,” Lakos-Bujas added.

From a regional perspective, the U.S. continues to command a quality premium over other markets, given its sector composition and cash-rich mega-cap stocks. 

Outside the U.S. and within international developed markets (DM), the outlook for U.K. equities is optimistic, given significant valuation support and favorable sector compositions. 

“Despite cheap valuation, we expect European equities to have a V-shaped path, ending the year relatively flat. On the other hand, Japan remains attractive with a potential pick-up in retail participation, strong balance sheets, improving shareholder focus, better consumer real income growth and a still supportive policy backdrop,” said Mislav Matejka, Head of Global Equity Strategy at J.P. Morgan. 

A bumpy start to the year is expected for emerging markets (EM) given high rates, geopolitical developments and lasting U.S. dollar strength. However, EM should become more attractive through 2024 on EM-DM growth divergence, demand for diversification away from the U.S. and low investor positioning.

For China, which has lagged meaningfully this year, there is the prospect of better performance if the growth momentum delivers on the upside and geopolitical risks stay contained.