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Citation - Fourth Quarter 2023



Maarten Ackerman
Chief Economist
Estimated reading time: 13 minutes 43 seconds

At the start of every year, the Citadel Asset Management team meets to discuss the global economy and markets to establish key themes for the year ahead. This year, in keeping with this pattern, we have set out 10 themes that we believe will impact the economic outcome of 2024.

As we kickstart the year, there is a sense of déjà vu as the outlook that we painted for 2023, remains mostly in play for 2024. Looming recession, market volatility, higher interest rates and rising geopolitical tension will continue to impact economies and markets, as is evident in the 10 themes for the year.


  1. Economic uncertainty 2.1

While the world escaped a recession in 2023, it was delayed rather than avoided. In 2023, the United States (US) economy was more resilient on the back of higher consumer savings following the 2020 pandemic fiscal support. However, high interest rates and inflation have taken their toll, and we are now seeing signs of strain on the US consumer, in the form of credit card debt, student loans, and delinquencies on vehicle loans, to list a few. In addition, service consumption, which was very strong following the pandemic, is also starting to run out of steam. With the US consumer being the engine behind US growth, the continuation of such trends will contribute to a slowdown in the country’s economic progression.

A number of other large global economies, including those in Europe, like Germany, are already facing the likelihood of recession. The global economy can also not expect China to save the day, given the structural challenges it is facing. As such, economic uncertainty will be a key theme for 2024. We are expecting well-below capacity growth with a potential for a global recession, albeit mild.

As an investment team, we will therefore be keeping a close eye on when the bottom of the cycle will materialise as this will present good opportunities for risky assets.

  1. The pivot in interest rates

Looking at inflation numbers around the globe, they would suggest that we have reached peak inflation, despite inflation numbers not being where central banks would like them to be just yet. This means that central banks will keep interest rates elevated for longer until inflation falls within their target bands, but further hikes are unlikely.

We expect inflation to fall within these bands during 2024, but there are a number of items in the inflation basket that remain quite sticky. Given the economic uncertainty mentioned above, this stickiness could result in unwanted stagflation where persistent high inflation is coupled with stagnant demand within economies.

Having said that, we do expect global central banks to start cutting interest rates during the course of the year given current inflation trends. If we see a big slowdown in the global economy with pressure on the job markets and a deeper recession than expected, this will happen quicker than anticipated. We expect that the global economy will be in for a softer landing and that global liquidity will be kept tight to ensure inflation does not surprise by shifting to the upside again.

From an investors’ point of view, 10-year bond yields fell to their lowest point in decades during the 2020 pandemic but saw a sharp rebound in 2023 on the back of decade-high interest rates, led by the US. Over the last two years rates have increased at their fastest pace, and by the biggest percentage, in a very long time.

This year we expect a pivot in the interest rate trajectory, meaning that central banks are going to start cutting rates. If their actions are on the back of easing inflation, market volatility should be reasonable. However, if there is a faster deterioration in economic activity than expected, then history shows us that a pivot in rate policy goes hand in hand with severe market volatility. We saw this following the 2008 financial crisis, the tech bubble of 2000, the Mexican crisis, as well as in a number of emerging market crises. This is an important factor that we will need to monitor within the 2024 outlook.

  1. Debt or credit crisis/event

We have not yet seen the full impact of the remarkably quick and massive increase in interest rates. The reason behind this is the savings buffer that consumers around the world had following COVID-19. In addition, US property owners did not feel the sting of higher rates because most of their mortgages are fixed rate mortgages.

However, higher rates have impacted new property sales in the US, because nobody wants to buy a home at 7%. This is therefore driving demand for rental properties, which is further underpinning higher inflation figures as US rentals are going up. If you look at countries across the Atlantic, the United Kingdom (UK), for example, have more variable rate mortgages. Property owners are therefore going to need to refinance their mortgages at higher interest rates soon, suggesting that UK consumers, and those globally, will start feeling the pain of higher rates. On the commercial property side, US commercial real estate has $1.5 trillion in loans that are going to mature over the next year and will need to be refinanced at higher interest rates. What’s more, we are already seeing delinquencies within the commercial real estate sector.

When we look at economies, given this understanding, we are seeing highly indebted governments combined with some highly indebted corporates, creating a scenario where a credit crisis can become increasingly likely. This is a global issue with countries around the world, including China and Hong Kong, Australia, Canada, France and the Netherlands, experiencing elevated private sector debt, which will further exacerbate economic uncertainty throughout 2024.

  1. China struggling

At the start of 2023, most market commentators were expecting a strong economic performance from China. This, however, did not materialise. The world’s second largest economy is dealing with a number of issues that are negatively impacting its economy. Despite its low inflation and low interest rates, the country’s property sector is under severe stress, which could lead to China experiencing its own debt crisis. As such, the Chinese government has embarked on a path of focused stimulation in an effort to support its troubled property sector.

Currently China has 8.5 million people who are blacklisted for missed payments on their properties. Household debt as a percentage of GDP has grown to over 60% in the last decade, which indicates that China is facing similar challenges to its Western counterparts.

Additional headwinds the country faces are geopolitical tension with the US and Taiwan, as well as a weak global growth outlook impacting their manufacturing and exports. This means that China is not in a position to support global economic growth as in the past. In addition, China’s slower growth will have a direct negative impact on global commodity demand and on commodity producing and exporting economies, like South Africa.

  1. Democracies tested

2024 is going to see over 70 national elections take place throughout the world, meaning more than 50% of the global population is going to the ballot box this year. This is going to be a great test for democracy, as in many countries these elections are not going to be free and fair.

In addition, we are seeing a trend towards increased populism and socialism. We saw the far-right win in Holland with the election of Geert Wilders in late 2023, and a similar trend in Italy, France and Argentina. In the US, Donald Trump is favoured to take the presidency for a second term later this year. Should Trump get re-elected, he will most certainly undo a lot of the work President Joe Biden has accomplished. A Trump presidency will also impact global geopolitical stability, with his controversial views on global trade, climate policy, and military funding. Trump has a diametrically opposed view to Biden, whose administration kickstarted 2024 dealing with two wars, Russia-Ukraine and the Middle East, as well as tensions between China and Taiwan. As such, 2024 is going to be an extremely important election year for the US and also the global geopolitical situation.

Another important election for us is the South African national election. There is a strong possibility that the ANC will get below 50% which suggests the need for a coalition government. If you look at the success of coalition governments in South Africa to date, this is not a success story. We expect that South Africa is going to face another four years of “muddling through” in terms of the political landscape. We are going to have to wait some time for the opposition parties to come through stronger before we see a significant tilt in the political environment, which will probably happen closer to 2028.

  1. Wars and global conflicts

February 2024 will be the start of the third year of war between Russia and Ukraine. There is also the Middle East conflict which is potentially more divisive and destabilising than the Russia-Ukraine war, where the allies did not really get involved.

In the Middle East, we have the US supporting Israel, and Iran and Syria backing Hamas and Palestine. In addition, there have been a number of marches around the globe supporting either the Israelis or the Palestinians. South Africa has even taken Israel to the International Court of Justice for genocidal acts. As such, a deterioration of this conflict will have a massive destabilising effect on the global economy which is already buckling under a slow economic environment and higher interest rates, as well as uncertainty given that it is such an important election year.

Africa also faced a number of coups in 2023 and we may see more in 2024. Then, waiting in the wings, we are still facing the possible China-Taiwan conflict which could kick-off in 2024.

The world is facing a very complex and threatening environment when we look at these conflicts. With Trump potentially becoming the next US president, the global geopolitical situation could get worse given the ability and willingness of the US to become involved in these wars. Another important consequence coming out of all of this tension will be the oil price, which may be driven up due to lower demand and constrained supply.

  1. West vs East and the race for Africa

In the discussion about geopolitical issues, we are seeing a defined split between the West and the East. A good example of this is the G7 vs BRICS. What is interesting is that both of these economic blocs are currently trying to woo Africa. Africa not only forms the physical and ideological middle ground between these two factions, it is also rich in natural resources, specifically green resources in the race for green energy. This race for Africa is going to potentially increase conflict on the continent, but it will also create opportunities with potentially increased investment inflows.

This dynamic has also seen the United Nations (UN) get increasingly involved in Africa as the organisation tries to remain relevant on the global stage. The UN is also managing the security risks in Africa, specifically those related to AI, which could be disastrous if it got into the wrong hands.

  1. Diversifying supply and demand

Across the world, countries are now reconsidering where they do business, open factories and where they invest. They are also looking at their supply partners and not relying on a single source of supply. This diversification started during the pandemic but is being fast-tracked by the geopolitical tension that we’re currently witnessing. What is important to note is that this diversification is potentially inflationary as manufacturing is moved from cheaper regions to relocate it to more stable countries or bring it back “home”, a key Trump election promise. This will exacerbate sticky inflation and the theme of ongoing higher rates for longer. It will result in additional trade headwinds, as well as the continuation of the slowdown in globalisation.

  1. South Africa in political gridlock

South Africa will continue treading water for the year with this being an election year and the current state of the State-Owned Enterprises. Over the last few years, South Africa has been dealing with the problems around Eskom and government has spent billions trying to bail out the utility. In 2023 there was great progress on the electricity front from the private green-energy sector which has installed alternative energy solutions, and we expect this to continue this year.

The major focus in 2024 is going to be on the country’s ports and railways, which are contributing significantly to the country operating below capacity, as companies cannot get products to market and cannot import or export goods efficiently. Going into December, 100,000 containers were stuck outside South Africa’s three major ports, unable to be offloaded for weeks. Until these issues are resolved, South Africa is going to punch below capacity in terms of its economic growth. Without capacity growth, the country’s budget, tax revenues and budget deficit will remain under pressure.

Unfortunately, given that this is an election year, we do not see much movement in fixing these issues until after the election – there have been a lot of promises but no action. Even after the election, organising coalition governments is going to slow down any progress needed to resolve the country’s structural issues, meaning that 2024 will see South Africa stuck in a gridlock. What is concerning is that business confidence in South Africa is lower than it was during the hard lockdowns of 2020, which does not bode well for investment in 2024.

  1. AI continues to disrupt

The final theme for 2024 is Artificial Intelligence (AI). AI-related shares supported markets greatly in 2023, with the top seven tech companies contributing massively to equity market success last year due to their exponential growth and outstanding performance. From a market point of view, we expect some of that performance to slow down.

That being said, AI is not going to disappear. It is definitely going to unleash further productivity and the development of new technologies around the world, which will bring with them a lot more opportunities and increased productivity. We have seen that most businesses have placed AI at the core of their strategies and according to MIT Sloan Management Review surveys, 80% of companies have it as a top priority for 2024.

As AI gains traction, regulations will become more important. That adds to the theme of West vs East, as countries not only try to develop AI but also seek to protect their intellectual property from the ‘enemy’. There is also a growing focus on responsible AI that will be in line with the United Nations Environmental, Social and Governance goals.

We also expect there to be far more collaboration between humans and AI, which will obviously enhance productivity and efficiency. During the course of 2024, we expect to see economies and businesses improve their productivity through the use of AI. However, there is a risk that it may make many jobs obsolete, but that is where reskilling will become paramount for people at risk. The use of AI is expected to create in the region of 133 million new jobs globally, but such positions are very specific in terms of coding abilities and skills based around AI. The key here is for people whose jobs are under threat, to reskill themselves so that they remain relevant in a new AI world.


This year will continue being uncertain and volatile, and we believe that it offers up more risks that can cause turbulence and destabilise the world. But with risk, there is always opportunity on the investment front. Citadel has a tried and tested process that has carried us successfully through many cycles like this one. For every risk that the markets present, there are opportunities that we will be able to utilise. We fully expect that we will not only be able to preserve your wealth but will also find opportunities to grow it throughout this year.

Despite these bleak economic themes, we are expecting a turnaround in the global economic cycle over the next 24 months, where a number of the 2024 headwinds, like higher interest rates and slow economic growth will start to turn. We are ready to benefit from such a turn and will ensure that our investment strategy remains optimal throughout the cycle.