Sailors beware! Many leading indicators are pointing to rough waters for the global economy and financial services firms in 2024. A perfect storm of adverse factors is coalescing going into the new year. Weathering the storm will require adept navigation of the multiple crosscurrents as well as deep insights into how to avoid potential pitfalls. The following are among the headwinds that will challenge financial services in 2024:
- Global conflicts: The conflicts in Ukraine and the Middle East have the potential to be massively disruptive to financial markets. The global economy largely weathered the storm of the Ukrainian-Russian war, but the addition of the war in Gaza has created substantial uncertainty in financial markets with no sign of abatement on the horizon.
- Recession potential: The signals are mixed about whether the current global soft economy will tip into an actual recession in 2024. Still, many financial services firms are taking a cautious approach to investment and hiring, anticipating the potential for the latter.
- Commercial real-estate meltdown: Work-from-home was already accelerating pre-pandemic, and COVID put the pedal to the metal on this trend. Firms of all sizes have realized that they do not need the same square-footage of work space as they did prior to the pandemic, and the ensuing right-sizing is already beginning to wreak havoc on the commercial real-estate market.
- Climate change: Climate change has been driving higher than anticipated claims on P&C insurers, putting pressure on premiums and leading executive teams to pursue more aggressive cost management strategies. Unfortunately, this trend shows no signs of abating in coming years, dictating the increasing need for technology to create optimization in P&C.
- Inflation: Inflation remains a top-of-mind concern for many consumers and small businesses, even as it slowly abates in many geographies.
- U.S. election: The U.S. presidential election in 2024 is likely to be just as turbulent as that in 2020, which will likely lead to equally turbulent times for financial markets.
- Regulation: A vast number of pending regulations will create additional burdens on financial services firms if enacted. PSD3, CCCA, and section 1033 of Dodd-Frank represent just a small subset of the many pending regulations that could substantially impact the economics of financial services products. Datos Insights is closely tracking these and their impact on our client base.
This confluence of headwinds is cause for concern, but there are many ways in which financial services firms can adjust and respond. Our Datos Insights teams have captured the stories and strategies that are being deployed and that look to be most successful (or not). We will be publishing advice on how to best navigate these rough waters in January 2024, and our advisory team is on call to help.
Please contact us at [email protected] to learn more about how our team can support you during the turbulent times ahead.