Before the U.S. election on November 5, 2024, the outlook for the world economy looked robust and consistent with economic expansion. Both the U.S. and European economies were expected to enjoy ongoing real wage growth, which would support private consumption, the largest component of aggregate gross domestic product (GDP) for both economies.
In addition, ongoing deceleration in inflation was expected to support real wage gains and, by extension, private consumption. Meanwhile, in China, unwanted fiscal retrenchment is being addressed, such that the economy was likely to accelerate modestly as we head into 2025.
But the results of the U.S. election have made this outlook far more uncertain. There are now many more plausible outcomes, and their distribution is nearly flat, with both left and right tails having increased significantly.