Many global economies poised for growth

Elections shouldn’t mar a promising Latin American outlook Last year’s election of a populist in Argentina and next year’s upcoming general elections in El Salvador, Panama, the Dominican Republic, Mexico and Uruguay aren’t likely to change a fundamentally bullish story across most Latin American economies. Most central banks in the region have been at the forefront of applying monetary policy to combat inflation. Consequently, average GDP across the region is growing faster than pre-pandemic levels, and foreign direct investment is pouring in. Heavy reliance on energy imports also is waning thanks to a new pipeline in Argentina.

Japan moves off the schneid After a string of lost decades, Japanese policymakers reintroduced the concept of inflation and growth to the world’s fourth-largest economy. Although the current prime minister may not last much longer and the Bank of Japan (BoJ) elected to stick with negative interest rates for the time being, business conditions seem to be on the upswing. As the BoJ winds down its yield curve control experiment, domestic Japanese firms (especially banks) stand to profit from a stronger yen and a robust labor market. Japan looks to be the only major market in the world in which genuine stock market reforms are fueling higher demand for equities.

Europe edges ahead of the U.S. European consumers should see real wages increase dramatically (as they have in the U.S.) when negotiated wage increases kick in and inflation comes off the boil faster than expected. European valuations look attractive on a relative basis and eurozone economies arguably start the year in a better place, too. European equities are priced for significant pessimism, whereas U.S. counterparts are priced for perfection. We believe that, over time, these valuation levels will converge to a certain degree. In the U.S., elections are looming, rates have peaked, the economy is softening and the government’s fiscal and current account deficits look to become a headwind. These should be negative for the U.S. dollar—and positive for international markets, especially Europe.