Barclays_Global_Outlook_As_goes_America_so_goes_the_world

This document is intended for institutional investors and is not subject to all of theindependence and disclosure standards applicable to debt research reports prepared for retailinvestors under U.S. FINRA Rule 2242. Barclays trades the securities covered in this report for itsown account and on a discretionary basis on behalf of certain clients. Such trading interestsmay be contrary to the recommendations offered in this report.Please see analyst certifications and important disclosures beginning on page 103.Global Outlook“As goes America, so goes the world”We prefer global equities to fixed income once again, as ratecuts are starting around the globe and joblessness is still low.But investors may elect to sit on the sidelines for now, awaitingclarity that will emerge from the US presidential election.ForewordMacro OutlookAll eyes on the US. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6All eyes are likely to be on the US as the elections approach. The macro outlook is stillreasonable: jobless rates are low, inflation has eased, and global rate cuts are starting. If theworld avoids a global trade war, a soft-ish landing is still likely.Investment OutlookInvesting in an election cycle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15The macro outlook remains supportive of risk, with the US expansion intact and cuts starting.We remain overweight equities over fixed income, despite the risk that many investors maymove to the sidelines until after the US elections. Summary of Asset Allocation Themes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20FICC ResearchGlobal Macro12 September 2024SIGNATUREAjay Rajadhyaksha+1 212 412 7669ajay.rajadhyaksha@barclays.comBCI, USCompleted: 11-Sep-24, 22:06 GMT Released: 12-Sep-24, 04:00 GMTRestricted - ExternalGlobal TradeTariffs: Counting the costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Tariff increases by the US on China and the RoW would lead to output losses for all. Their sizeand distribution depend on US trade exposure, retaliation measures and confidence effects.China would be hardest hit, knocking ~2pp off growth, followed by the US and EA. Thedownturn would lead the Fed and ECB to ease more.Global TradeTariffs: Cross-asset implications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Given the combination of higher prices and lower growth shocks that tariffs tend to imply, thegrowth effects are likely ultimately to lead the differentiating impulse response across assets.We identify and quantify the effects on global equities, credit, the yield curve and the dollar.ChinaEscaping Japanification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69China faces mounting structural headwinds as a deflating housing bubble upends the growthmodel, ravages household/firm balance sheets and spurs del