AmazonScience/document-haystack

1Outlook2Economic and Competitive Outlook 3The following sections provide an overview of our expectations for the Group and the 4business environment for the financial year 2024. The chapters regarding the outlook for the 5global economy and the asset management industry reflect our general expectations 6regarding future economic and industry developments. They are essentially based on our CIO 7View – which is our Chief Investment Office view providing forecasts and future views on 8macroeconomic topics, financial markets, individual asset classes, and market risks. As part 9of our fiduciary responsibility, this view is used as a foundation for our product investment 10and development decisions as well as shared with our clients.11Global Economic Outlook12Demand-side issues are currently dominating the euro area: building permits suggest that the 13construction industry is likely to weigh on economic development in the near future. The 14same applies to other investments, which are also considered to be interest sensitive. Since 15inventories also tie up capital and thus cost money, headwinds are also expected in this area. 16Indicators such as purchasing managers' indices suggest that the global weakness in the 17manufacturing sector will also affect European production. As a result, net exports are 18expected to make only a small contribution to growth. The expected slowdown in the 19manufacturing sector should be offset by a recovery in private consumption. This will be 20supported by a renewed rise in real wages because of high wage settlements and falling 21inflation rates. However, as real wage growth will not be sufficient to fully compensate for 22previous wage losses, we expect growth in the euro area to be very moderate. In 2024, the 23economy should grow by around 0.7% for the year as a whole. The inflation rate should be 24around 2.5% for the same period. Against this backdrop, the European Central Bank should 25be able to start gradually normalizing key rates in the summer.26We maintain our expectation that US economic growth will slow through 2024. We now 27expect growth to bottom out in the second quarter of 2024. After this soft patch, growth is 28expected to accelerate slowly. This mild slowdown in economic activity should support the 29Federal Reserve’s efforts to eventually regain control of inflation. Despite our expectation of a 30mild downturn, we do not expect unemployment to rise significantly. Inflation rates are likely 31to drift lower amid below-potential growth. The Federal Reserve is likely to respond with rate 32cuts starting in June, reflecting the new economic reality. We expect a total of three rate cuts 33in 2024. In the context of the upcoming elections, we also expect a lively discussion on 34government finances. While the outcome of the elections and the political reaction to high 35debt levels are not yet predictable, we do not expect fiscal policy to be supportive in the 36coming years.37In 2024, we expect China's GDP growth to normalize around 4.7% for the year. While the real 38estate sector is expected to stop contributing to growth, the drag on growth is diminishing, 39while consumption is likely to stabilize, helped by the gradual decline in unemployment that 40we saw during 2023. Ample policy support as well as structural reforms (e. g. local 41government debt restructuring) and strong activity in new growth sectors (green energy, 42technological upgrading in many sectors) should offset the negative growth impact from the 43long-term adjustment process in the housing sector.44Asset Management Industry45We believe several major trends will continue to provide opportunities, but also challenges, 46for the asset management industry:47a) Digitalisation: Advances in technology including generative artificial intelligence and 48tools such as Chat GPT together with blockchain developments will revolutionise back 49and middle-office operations, distribution (robo-advisory) and product choice. 50Digitalisation is also leading to the emergence of new asset classes and could potentially 51democratise some alternative asset classes as managers look to embrace tokenisation. 52b) Sustainability: Sustainability has become a central feature of the asset management 53industry. Many institutional investors are now incorporating ESG targets and 54considerations in their investment objectives with an increasing number establishing net 55zero targets. However, significant challenges remain including the political backlash in the 56US, the absence of standardised terminology, concerns about greenwashing, the rising 57volume of regulation and access to comprehensive data. While climate change continues 58to be a major theme, diversity and inclusion has gained prominence following the 59pandemic and interest is growing in biodiversity and nature.60c) Customization: Demand for customised solutions is set to continue. In the retail space, 61growing investor sophistication and innovative technology are enabling asset managers to 62offer solutions such as direct indexing and access to alternative investments, previously 63only available to institutional investors. In the institutional market, outsourcing is growing 64driven by market complexity, while in the retirement space, there is continuing demand 65        66To our Shareholders Summarised 67Management Report68Consolidated 69Financial Statements Compensation Report Corporate Govern-70ance Statement71Supplementary 72Information DWS 2023 Annual Report73 74Outlook7520 Economic and Competitive Outlook 76The secret animal #5 is a "bear".