As of Oct. 18, 2024
When providing thoughts for this column, I often focus on the macroeconomic situation in the U.S. because it’s what affects you most. This focus also reflects our investment view that the U.S. continues to be the world’s leader in economic and market influence. However, we also pay close attention to international economies.
The 2024 global economic landscape reveals a world in transition, with the pandemic’s influence still looming large. China, the United States and European nations are each navigating distinct economic currents.
China’s self-reported GDP growth surpassed expectations earlier this year, yet economic structural imbalances persist. Key risks include an overdeveloped and troubled real estate market, local government debt and geopolitical tensions. China’s economy has historically been driven by investments and exports, but it is trying to transition to a consumer-driven model. In the meantime, China is leaning on policies like lowering interest rates and increasing government spending to boost economic growth. Coupled with major demographic headwinds, we believe China will continue to experience economic challenges for the foreseeable future.
Europe, traditionally an industrial powerhouse, now trails the U.S. in economic dynamism. Despite its strong industrial foundation, Europe’s slower adoption of new technologies and lower productivity growth have widened the economic gap. Strikingly, the U.S. tech sector’s market capitalization now surpasses the entire European stock market, underscoring the shift from traditional industries to tech-driven growth.
The U.S. market concentration has reached unprecedented levels. The “Magnificent Seven” technology companies dominate the stock market landscape, reflecting America’s technological prowess but posing diversification risks. Interestingly, this concentration trend is not unique to the U.S.; emerging markets like Taiwan also exhibit high levels of concentration.
As these economic narratives unfold, the global financial landscape faces significant transformation. We continue to favor the U.S. over international stocks, but this preference is based on structural factors and not any “home bias.” We will monitor these dynamics closely to position investments and deliver value to our clients.
David Royal is executive vice president and chief financial & investment officer at Thrivent.
