Finance

Zepz, which is backed by TCV, Accel, Leapfrog and other major venture capital funds, told CNBC exclusively that it laid off 30 roles across its people and marketing functions.
In May, Zepz cut 26% of its workforce, citing duplication of roles that resulted from its acquisition of Sendwave, another money transfer service.
The business was last valued at $5 billion, making it one of the largest and most valuable fintech companies in Europe.

Zepz, which owns the WorldRemit and Sendwave brands, has a headcount of around 1,600.
Sopa Images | Lightrocket | Getty Images

Zepz, the money transfer group that owns WorldRemit, made a fresh round of layoffs.
The British fintech unicorn, which is backed by TCV, Accel, Leapfrog and other major venture capital funds, told CNBC exclusively that it laid off 30 roles across its people and marketing functions.

“Zepz has entered a redundancy consultation which will could affect less than 2% of its global headcount,” a Zepz company spokesperson said in an exclusive statement to CNBC.
“Zepz values the contributions these colleagues have made to our company,” the spokesperson added.
“As part of the redundancy package, all impacted individuals will be offered support via our Employee Assistance Programme, including coaching, counselling, and re-employment support.”
“In line with our organisational values, our priority is ensuring all decisions relating to redundancies and restructuring are well-communicated and delivered with humanity while protecting the privacy of those impacted,” the spokesperson added.
That follows a separate round of layoffs the company embarked on earlier this year.

In May, Zepz cut 26% of its workforce, citing duplication of roles that resulted from its acquisition of Sendwave, another money transfer service.
Zepz hasn’t been immune to the effects of slowing momentum in the digital payments space, which has forced companies to cut back on costs and, in several cases, lay off staff.
The company reached profitability for the first time last year.
Zepz said that, with this in mind, its focus is on “innovation and continuous improvement for our users, delivering meaningful products that make finance more convenient and accessible to migrant communities.”
“To fully realise our mission to unlock the prosperity of cross-border communities, we sometimes need to make tough decisions,” Zepz told CNBC.
Zepz has long been touted as an IPO candidate in the U.K., but its timeline on reaching that goal is currently unclear. The business was last valued at $5 billion, making it one of the largest and most valuable fintech companies in Europe. More

Online investments app Robinhood said Thursday that it’s set to launch its platform in the U.K., in the company’s third attempt at cracking international expansion.
Features on offer by the firm include the ability to choose from 6,000 U.S. stocks including Tesla, Amazon and Apple, and 24-hour trading five days a week.
Robinhood CEO Vlad Tenev told CNBC that he doesn’t fear “deja vu” with the firm’s third attempt to launch in the U.K., adding he’s “confident we’ll be able to serve the customers here tightly.”

A woman’s silhouette holds a smartphone with the Robinhood Markets logo in the background.
Rafael Henrique | Sopa Images | Lightrocket | Getty Images

Online investments app Robinhood said Thursday that it’s set to launch its platform in the U.K. in early 2024, marking the company’s third attempt at cracking international expansion.
Features include the ability to choose from 6,000 U.S. stocks and 24-hour trading five days a week. Robinhood currently offers 24-hour trading in the U.S., allowing trades to happen outside 9:30 a.m. ET and after 4 p.m. ET.

Robinhood won’t offer U.K. stocks to begin with but will look to add them as it brings more products into the platform. The U.K. version won’t include options and other derivatives at launch, either.
Jordan Sinclair, Robinhood’s U.K. chief, said he expects 24-hour trading to be popular, as it will let users trade on market-moving news.
“You wake up in the morning, you read the news headlines, and then you have to wait,” Sinclair said. “Customers actually can make a trade and choose their investment strategy and actually act on that market news.”

Robinhood has already tried to launch in the U.K. twice.
A waiting list it rolled out in 2019 saw over 300,000 people sign up, but the company pulled the plug on its U.K. expansion plans, citing soaring demand at home during the Covid pandemic as interest in retail investing climbed dramatically.

Then, last year, it sought to acquire British crypto-trading app Ziglu. That deal faltered, however, and Robinhood was forced to write off the value of its investment, with the company reporting a $12 million impairment charge on the failed transaction.
Brits will be able to join a waitlist starting Thursday and will be notified when they can sign up for early access at a later point in time. In a bid to get more traction fast, Robinhood is also asking users to share a unique referral link with friends and family to move them up the queue.
“My aspiration is to be one of the largest employers in England, nothing would make me happier,” Tenev said. “And, you know, there’s a lot of great talent. So this, this could be a centre of excellence for Robinhood.”
Dan Moczulski, U.K. managing director of EToro, a rival stock trading platform, said the arrival of more competition in the retail trading market marks “an exciting time for the industry.”
“More competition will always be a good thing for investors,” Moczulski told CNBC. “As one of the leading trading and investing platforms in the UK, it also keeps us on our toes and pushes us to continue innovating and broadening our product range for our users.” 

Not scared of ‘deja vu’

Robinhood CEO Vlad Tenev said he doesn’t fear “déjà vu” with the firm’s third attempt to launch in the U.K.
“We’ve made sure we taken care of all of the details, the platform is much more robust,” Tenev told CNBC in an interview. “So I don’t think that it’ll be déjà vu. I think that we’re very confident we’ll be able to serve the customers here tightly.”

Robinhood is launching with a license from the Financial Conduct Authority, the U.K.’s markets regulator, and Tenev says the firm has a good relationship with the regulator.
The FCA has previously warned about “gamification” of investments, something the U.S. Securities and Exchange Commission is also worried about. When contacted by CNBC, an FCA spokesperson said the regulator wouldn’t comment on individual companies, but that companies are obliged to respect consumer duty standards set out by the regulator.
Regulators are concerned brokerage apps like Robinhood, eToro, and Public, which engage investors with stimulating features like push notifications, colorful graphics, and a game-like interface, may encourage excessive trading that harms investors but is profitable for market-makers.
Customer cash will be held in segregated accounts protected by U.S. Federal Deposit Insurance Commission insurance, Robinhood said, rather than the U.K. Financial Services Compensation Scheme. Robinhood users will be able to make a 5% annual yield on cash held in their accounts.
Robinhood won’t launch payment-for-order-flow in the U.K., which refers to the practice of routing trades through market-makers like Citadel Securities in return for a slice of the profits. PFOF is banned in the U.K. Instead, the firm expects to make money from other lines of business, including securities lending, margin lending, interest on uninvested cash, and its premium Robinhood Gold subscription service.
Payment for order flow can create conflicts of interest, critics say, as brokers have an incentive to direct order flow to market makers offering such arrangements over the interests of their clients. More

The november meeting of the Organisation of the Petroleum Exporting Countries and its partners (opec+) was meant to be a staid affair. Instead, the summit was first pushed back from the 26th and then moved online, revealing a fracas between the cartel’s big producers and its minnows. After acquiescing to lower output quotas at their previous meeting in June, opec+’s west African members were unhappy to learn that Russia and Saudi Arabia, the bloc’s de facto leaders, wanted to further curtail output. One oil minister, Diamantino Azevedo of Angola, planned to boycott the in-person meeting altogether.On November 30th OPEC+ is at last due to meet online. Members are reported to be preparing modest additional cuts into 2024. This would represent the extension of a strategy in place since last October, under which they try to resist downward pressure on prices by restricting supply. Saudi Arabia and Russia are leading the way, with cuts of 1m barrels a day (b/d) and 300,000 b/d respectively; the rest of opec+ is together contributing another 3.7m b/d in cuts. Yet the price of the Brent crude benchmark is down by nearly a fifth since the strategy was introduced—it currently sits at $82 a barrel—and has fallen for the past five weeks.image: The EconomistThe back-and-forth over opec+’s November pow-wow exposes the difficulties that now face the cartel. Recent oil-price drops reflect both expectations of slowing global demand, influenced by concerns over China’s economy, and the fact that geopolitical risk has fallen: few now expect the war in Gaza to turn into a broader regional conflict. At the same time, other producers, including America, Brazil and Guyana, have increased output, making up for opec+’s cuts (see chart). Yet the price falls also reflect the fact that opec+ is struggling to hold the line. The cartel welcomed an additional ten countries when it gained the plus sign in 2016, and plans to recruit still more. A larger organisation has no choice but to straddle divergent interests, as is now clear. The Angolan minister who planned to boycott the in-person get-together also walked out of another meeting in June alongside his counterpart from Gabon. The two ministers were apparently protesting against quota reductions. Along with others, they worry that output cuts will hurt investment in exploration.At least Angola does not exceed its targets. Not all countries are so well-behaved. Iraq, for example, is producing 180,000 b/d more than its limit. Iran and Venezuela are not subject to the group’s production caps because of sanctions. Mexico refuses to accept quotas. Despite being members of opec+, all have been selling more oil of late, eagerly hoovering up the market share forfeited by Russia and Saudi Arabia.The last time the group faced a similar state of affairs—decelerating demand, new entrants and co-ordination problems—in 2014, officials chose a different strategy, as Alberto Behar of the imf and Robert Ritz of Cambridge University have written. Back then members increased supply in an attempt to drive down the oil price. The aim, as announced at opec’s meeting in November nine years ago, was to grab market share (and in so doing drive out American competitors). This had the advantage of stimulating demand and not requiring discipline among opec’s members: they were able to produce oil to their heart’s content.Such an approach is no longer feasible. opec’s market-share strategy last time round helped discipline America’s oil producers, pushing them to become more efficient and therefore more resistant to future squeezes. JPMorgan Chase, a bank, reckons that the cost of getting oil out of the American ground has declined by more than one-third since 2014. The country’s oilmen have found methods to fracture rocks that produce more fissures, easing the extraction of oil, and now drill deeper wells that have longer lifespans.Saudi Arabia would very much like opec+’s current strategy to succeed. Its free-spending government has pushed up the price at which the country’s budget balances to $85 a barrel, according to the imf—and that number is higher when outlays from its sovereign wealth fund are included. Russia, meanwhile, needs oil revenues to fund its war in Ukraine. Delaying the meeting to November 30th did not help either country. Doing so wiped another 5% from the price of Brent crude. ■ More

Charlie Munger ahead of the Berkshire Hathaway Annual Shareholders Meeting in Omaha Nebraska.
David A. Grogan | CNBC

Warren Buffett is arguably the most celebrated investor of our generation, but he couldn’t have earned the title without Charlie Munger’s influence.
Munger, Berkshire Hathaway’s vice chairman who passed away Tuesday at the age of 99, was instrumental in directing a young Buffett into buying strong-brand quality companies instead of dirt-cheap failing names that he called “cigar butts.”

The blueprint Munger instilled in Buffett was simple: To buy a wonderful business at a fair price, not a fair business at a wonderful price. It became the reason that Berkshire managed to grow into an empire consisting of first-class businesses in insurance, railroad, retail, energy and manufacturing.
“It took Charlie Munger to break my cigar-butt habits and set the course for building a business that could combine huge size with satisfactory profits,” Buffett wrote in Berkshire’s the 50-year anniversary letter in 2014. “Charlie’s most important architectural feat was the design of today’s Berkshire.”
The “Oracle of Omaha” compared buying troubled companies at deep discounts to picking up a discarded cigar butt that had one puff remaining in it. “Though the stub might be ugly and soggy, the puff would be free. Once that momentary pleasure was enjoyed, however, no more could be expected,” he said.
Straightening Buffett out
Buffett studied under fabled father of value investing Benjamin Graham at Columbia University after World War II and developed an extraordinary knack for picking cheap stocks. He said Munger made him realize this cigar-butt investing strategy could only go so far, and if he wanted to expand Berkshire in a significant way, it wouldn’t be enough.
“He actually hit me over the head with a two by four from the idea of buying very so-so companies at very cheap prices, knowing that that was some small profit and looking for really wonderful businesses that we could buy at fair prices,” Buffett said in an interview.

As Munger put it at the 1998 Berkshire shareholder meeting: “It’s not that much fun to buy a business where you really hope this sucker liquidates before it goes broke.”
See’s Candies
While Buffett said there was not a strong line of demarcation where Berkshire went from cigar butts to wonderful companies, the deal to buy See’s Candies marked a significant step towards that direction.
In 1972, Munger convinced Buffett to sign off on Berkshire’s purchase of See’s Candies for $25 million even though the California candy maker had annual pretax earnings of only about $4 million.
It has since produced more than $2 billion in sales for Berkshire.
“Overall, we’ve kept moving in the direction of better and better companies, and now we’ve got a collection of wonderful companies, Buffett said.

Read more about Charlie Munger’s legacy More

Warren Buffett (L), CEO of Berkshire Hathaway, and vice chairman Charlie Munger attend the 2019 annual shareholders meeting in Omaha, Nebraska, May 3, 2019.
Johannes Eisele | AFP | Getty Images

Charlie Munger’s unique partnership with Warren Buffett, spanning over half a century, helped forge one of the most successful conglomerates in history.It was a special relationship.
At age 35, Munger was introduced to the then-29-year-old Buffett in Omaha, Nebraska. The two started working together and ended up transforming Berkshire Hathaway from a small textile mill into a $785 billion multifaceted juggernaut. The journey to their unparalleled success was full of learning, experience and laughter, but never an argument.

“Charlie and I have never had an argument,” Buffett said in 2014. “We’ve disagreed on a lot of things. And it’s just never led, and never will, lead to an argument. We argue with other people.”
Buffett said when they did have a differing view, Munger, who died Tuesday just one month shy of his 100th birthday, would say “well, you’ll end up agreeing with me because you’re smart and I am right.”
‘We think alike’
As often shown in interviews and shareholder meetings, they shared a similar, quirky sense of humor and enjoyed occasionally poking fun at each other. Compared to Buffett’s folksy image, Munger often spoke bluntly, sprinkling witty zingers that his followers adored.
“Most of the time, we think alike,” Munger said in 2014. “That’s one of the problems. If one of us misses it, the other is likely to, too.”
In 2010, when Munger had to miss a special Berkshire shareholder meeting, Buffett brought on stage a cardboard cutout of his right-hand man, mimicking “I couldn’t agree more” in Munger’s voice.

“It is almost hilarious. It’s been so much fun,” Munger said of his partnership with Buffett.
Munger’s Costco obsession
On the rare occasions they disagreed, the two icons dealt with it by wielding laughter. One example was Munger’s love and obsession over Costco, a big-box retailer Buffett never really favored.
During Berkshire’s 2011 annual meeting, Buffett made up a scenario involving airplane hijackers asking about his and Munger’s last requests on earth.
“The hijackers picked us out as the two dirty capitalists that they really had to execute,” he said. “They didn’t really have anything against us, so they said that each of us would be given one request before they shot us.”
“Charlie said, ‘I would like to give, once more, my speech on the virtues of Costco — with illustrations.’ The hijacker said, ‘Well, that sounds pretty reasonable to me.’ He turned to me and said, ‘And what would you like, Mr. Buffett?’ And I said, ‘Shoot me first,'” Buffett said, sparking gales of laughter from shareholders.

Charles Munger and Warren Buffet faces in Berkshire Hathaway T-Shirts at the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska.
David A. Grogan | CNBC

Munger broadened Buffett’s approach
Early in their careers, Munger broadened Buffett’s investing approach from buying dirt cheap, “cigar-butt” companies that might still have a little smoke left in them, to instead focusing on quality companies selling at fair prices.
“He actually hit me over the head with a two by four from the idea of buying very so-so companies at very cheap prices, knowing that that was some small profit and looking for really wonderful businesses that we could buy at fair prices,” Buffett said.
As Munger put it at the 1998 Berkshire shareholder meeting: “It’s not that much fun to buy a business where you really hope this sucker liquidates before it goes broke.”
Later in his career, Buffett realized he was more inclined toward action than Munger when it comes to deal-making. He once joked that Munger was the “abominable no-man,” often curbing Buffett’s enthusiasm to acquire certain companies.

Read more about Charlie Munger’s legacy

Win-win relationship
The two investing legends were firm believers in reciprocation and respect when it came to successful relationships.
“We both have this fundamental idea that the world works better if you make your relationships win win. And we both early learned that the way to get a good partner was to be a good partner,” Munger said. “These are very old fashioned ideas. And they just worked so fabulously well.”

Charlie Munger (left) and Warren Buffett.
VCG | Visual China Group | Getty Images

Much like Munger encouraging Buffett to pivot toward quality businesses early on in their career, the “Oracle of Omaha” said Munger inspired him every day in one way or another.
“He’s made me think about things I haven’t thought about. In fact, I would say that every time I’m with Charlie, I’ve got at least some new slant on the idea that that causes me to rethink certain things,” Buffett said.
Munger graduated magna cum laude from Harvard Law School in 1948, founding his law firm of Munger, Tolles & Olson and his own hedge fund in 1962. Munger closed the fund in 1975, and three years later, he formally became vice chairman of Berkshire.
“Charlie has given me the ultimate gift that a person can give to somebody else,” Buffett said. “I’ve lived a better life because of Charlie.”
Don’t miss these stories from CNBC PRO: More

JPMorgan Chase CEO Jamie Dimon said Wednesday that his bank, if ordered by the U.S. government, would exit China, the world’s second-largest economy.
“If the American government makes me leave China, I’m leaving China,” Dimon said at the DealBook Summit.
Growing geopolitical tensions have raised concerns that China could move to annex Taiwan.

JPMorgan Chase CEO Jamie Dimon said Wednesday that his bank would exit China if the U.S. government ordered him to.
“If the American government makes me leave China, I’m leaving China,” Dimon said at the DealBook Summit during a discussion about a potential future conflict over Taiwan. “If there’s a war in Taiwan, you would take all bets off.”

JPMorgan, which says on its website that it has been active in China for a century, does investment and corporate banking, payments and asset management there. Growing geopolitical tensions, fueled by wars in Ukraine and Israel, have raised concerns that China could move to annex Taiwan.
“No one thinks it’s going to happen; it may happen,” Dimon said about war over Taiwan. “That would be really bad for the world and really bad for China.”

Jamie Dimon, chair and CEO of JPMorgan Chase, speaks during the New York Times annual DealBook summit in New York City on Nov. 29, 2023.
Michael M. Santiago | Getty Images

Dimon called relations with China, the world’s second-largest economy, “a very complicated subject” and said that engagement with both China and the U.S. government was necessary.
“I think it’s good for an American bank to be there to help multinationals around the world and China with their own development if it makes sense,” Dimon said. “If for some reason the American government says ‘Nope, can’t do that anymore,’ then so be it.”
Dimon also pointed out that while the U.S. maintains good relations with Mexico and Canada, China has “done a pretty good job angering all the people around them,” and the country has “terrible demographics.”

The bank advises Chinese clients including fast-fashion retailer Shein and Tiktok parent company ByteDance.
Dimon addressed security concerns related to TikTok, saying, “You can imagine the due diligence and work we do to figure out the truth about those things.”
“If some of those people are doing things that we think are truly bad, we would not bank them,” he said.Don’t miss these stories from CNBC PRO: More

To learn more about the CNBC CFO Council, visit cnbccouncils.com/cfo-council/

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Richmond Fed President Thomas Barkin said he’s not ready to commit to a particular policy path with so much uncertainty in the air.
Barkin called the possibility of easing policy and cutting rates “a forecasting question” that he’s not ready to answer.
Atlanta Fed President Raphael Bostic also offered commentary Wednesday, saying in an essay that he sees economic growth slowing substantially and believes inflation will come down further as well.

Richmond Federal Reserve President Thomas Barkin said Wednesday that policymakers need to retain the option of raising interest rates if inflation doesn’t show enough progress coming down.
Markets largely expect the Fed has stopped raising rates and will start cutting in 2024. But Barkin said he’s not ready to commit to a particular policy path with so much uncertainty in the air.

“If inflation comes down naturally and smoothly, awesome, you know, there’s no particular need to do anything with interest rates if inflation steps down,” he told CNBC’s Steve Liesman during an interview at the CNBC CFO Council Summit.
“But if inflation is going to flare back up, I think you want to have the option of doing more on rates,” Barkin added. “I guess the bigger point is, there’s no precision that anyone can point to at exactly what the level of rates that exactly handles inflation and exactly the way you want to handle it. So you’re constantly trying to adjust on the fly as you learn more about the economy.”
Barkin spoke shortly after the Commerce Department reported that the economy grew at a 5.2% annualized pace in the third quarter. As growth has held strong, inflation is still above the Fed’s 2% annual target, though it has shown a consistent progression lower in recent months. The Fed’s preferred inflation measure of core personal consumption expenditures showed a 12-month rate of 3.7% in September and is expected to show a slightly lower reading in October.
Pricing in futures markets indicates the Fed could cut rates as much as four times, or a full percentage point, next year. Fed Governor Christopher Waller said Tuesday that he’d consider cuts if the inflation data shows progress over the next several months.
However, Barkin called the possibility of easing policy “a forecasting question” that he’s not ready to answer.

“I don’t see it as a there’s a right answer on rates or a wrong answer on rates,” he said, adding that he’s “skeptical” about inflation and thinks it’s going to be “stubborn” ahead.
Atlanta Fed President Raphael Bostic also offered commentary Wednesday, saying in an essay that he sees economic growth slowing substantially and believes inflation will come down further as well.
“Altogether, the research, data, survey results, and input from business contacts tell me that tighter monetary policy and tighter financial conditions more broadly are biting harder into economic activity,” Bostic wrote. “At the same time, I don’t think we’ve seen the full effects of restrictive policy, another reason I think we’ll see further cooling of economic activity and inflation.”
Bostic said his staff expects the inflation rate to decline to 2.5% by the end of 2024 and then get back to the Fed’s 2% target by the end of 2025.
Both Bostic and Barkin will be voters in 2024 on the rate-setting Federal Open Market Committee. More

Deutsche Bank has a considerably bleaker prognosis than market consensus, projecting that Canada will have the highest GDP growth among the G7 in 2024 at just 0.8%.
Goldman Sachs Asset Management economists believe the Fed is unlikely to consider cutting rates next year unless growth slows by substantially more than current projections.
JPMorgan Asset Management strategists echoed this note of caution, claiming that the risk of a U.S. recession was “delayed rather than diminished” as the impact of higher rates feeds through into the economy.

A security guard at the New York Stock Exchange (NYSE) in New York, US, on Tuesday, March 28, 2023.
Victor J. Blue | Bloomberg | Getty Images

With central banks having hiked interest rates at breakneck speed and those rates likely to stay higher for longer while the lagged effects set in, the macroeconomic outlook for 2024 is far from clear.
The International Monetary Fund baseline forecast is for it to slow from 3.5% in 2022 to 3% in 2023 and 2.9% in 2024, well below the historical average of 3.8% between 2000 and 2019, led by a marked slowdown in advanced economies.

The Washington-based institution sees U.S. GDP growth, which has remained surprisingly resilient in the face of over 500 basis points of interest rate hikes since March 2022, to remain among the strongest developed market performers at 2.1% this year and 1.5% next year.
The U.S. economy’s resilience has fueled an emerging consensus that the Federal Reserve will achieve its desired “soft landing,” slowing inflation without tipping the economy into recession.
The market is now largely pricing a peak at the current Fed funds target range of 5.25-5.5%, with interest rate cuts to come next year.
Yet Deutsche Bank’s economists, in a 2024 outlook report published Monday, were quick to point out that monetary policy operates with lags that are “highly uncertain in their timing and impact.”
“With the lagged impact of rate hikes taking effect, we can already see clear signs of data softening. In the U.S., the most recent jobs report showed the highest unemployment rate since January 2022, credit card delinquencies are at 12-year highs, and high yield defaults are comfortably off the lows,” Deutsche’s Head of Global Economics and Thematic Research, Jim Reid, and Group Chief Economist David Folkerts-Landau said in the report.

“At the outer edges of the economy there is obvious stress that is likely to spread in 2024 with rates at these levels. In the Euro Area, Q3 saw a -0.1% decline in GDP, with the economy in a period of stagnation since Autumn 2022 that will likely extend to mid-Summer 2024.”
The German lender has a considerably bleaker prognosis than market consensus, projecting that Canada will have the highest GDP growth among the G7 in 2024 at just 0.8%.
“Although that is still positive and the profile improves through the year, it means the major economies will be more vulnerable to a shock as they work through the lag of this most aggressive hiking cycle for at least four decades,” Reid and Folkerts-Landau said, noting that potential “macro accidents” would be more likely in the aftermath of such rapid tightening.
“We had 10-15 years of zero/negative rates, plus an increase in global central bank balance sheets from around $5 to $30 trillion at the recent peak, and it was only a couple of years ago that most expected ultra-loose policy for much of this decade. So it’s easy to see how bad levered investments could have been made that would be vulnerable to this higher rate regime.”
U.S. regional banks triggered global market panic earlier this year when Silicon Valley Bank and several others collapsed, and Deutsche Bank suggested that some vulnerabilities remain in that sector, along with commercial real estate and private markets, creating “a bit of a race against time.”
‘Higher for longer’ and regional divergence
The prospect of “higher for longer” interest rates has dominated the market outlook in recent months, and Goldman Sachs Asset Management economists believe the Fed is unlikely to consider cutting rates next year unless growth slows by substantially more than current projections.
In the euro zone, weaker growth momentum and a large drag from tighter fiscal policy and lending conditions increase the likelihood that the European Central Bank pauses its monetary policy tightening and potentially pivots toward cuts in the second half of 2024.
“While the Fed and ECB seem to have steered away from a hard landing path during the tightening cycle, exogenous shocks or a premature pivot to policy easing may reignite inflation in a way that requires a recession to force it lower,” GSAM economists said.
“Conversely, further monetary tightening might trigger a downturn just as the effects of prior tightening begin to take hold.”

GSAM also noted regional divergence in the trajectory of growth prospects and inflation patterns, with Japan’s economy surprising positively on the back of resurgent domestic demand driving wage growth and inflation after many years of stagnation, while China’s property market indebtedness and demographic headwinds skew its risks to the downside.
Meanwhile Brazil, Chile, Hungary, Mexico, Peru and Poland were early hikers of interest rates in emerging markets and were among the first to see inflation slow sharply, meaning their central banks have either begun cutting rates or are close to doing so.
“In a desynchronized global cycle, with higher-for-longer rates and slower growth in most advanced economies, the road ahead remains uncertain,” GSAM said, adding that this calls for a “diversified and risk conscious investment approach across public and private markets.”
Recession risk ‘delayed rather than diminished’
In a roundtable event on Tuesday, JPMorgan Asset Management strategists echoed this note of caution, claiming that the risk of a U.S. recession was “delayed rather than diminished” as the impact of higher rates feeds through into the economy.
JPMAM Chief Market Strategist Karen Ward noted that many U.S. households took advantage of 30-year fixed rate mortgages while rates were still around 2.7%, while in the U.K., many shifted to five-year fixed rates during the Covid-19 pandemic, meaning the “passthrough of interest rates is much slower” than previous cycles.
However, she highlighted that U.K. exposure to higher rates is due to rise from about 38% at the end of 2023 to 60% at the end of 2024, while first-time buyers in the U.S. will be exposed to much higher rates and the cost of other consumer debt, such as auto loans, has also risen sharply.
“I think the the key conclusion here is that interest rates do still bite, it’s just taking longer this time around,” she said.

The U.S. consumer has also been spending pent-up savings at a faster rate than European counterparts, Ward highlighted, suggesting this is “one of the reasons why the U.S. has outperformed” so far, along with “incredibly supportive” fiscal policy in the form of major infrastructure programs and post-pandemic support programs.
“All of that fades into next year as well, so the backdrop for the consumer just doesn’t look as strong for us as we go into 2024 that will start to bite a little bit,” she said.
Meanwhile, corporates will over the next few years have to start refinancing at higher interest rates, particularly for high-yield companies.
“So growth slows in 2024, and we still think the risks of a recession are significant, and therefore we’re still pretty cautious about the idea that we’ve been through the worst and we’re looking at an upswing from here on,” Ward said. More