Business insolvencies up again, markets pricing in a Trump win but forgot inflation and shipping costs soaring ahead of trade frictions

18 July 2024

Executive summary

This week, we look at three critical issues:

  • Business insolvencies: Up 10% in 2024. As of mid-2024, most countries have been reporting a continuous upside trend in business insolvencies, supporting our forecast for a noticeable increase in half of the countries globally. Two out of three countries are set to end the year with the number of insolvencies above pre-pandemic levels. With sluggish growth, global business insolvencies are expected to accelerate by +10% in 2024. Germany should see a +21% increase for 2024, Italy +18%, France +12% and Belgium +11%. In 2025, we expect a moderate global increase (+1%), primarily driven by North America (+5%) and China (+4%), while the rest of the world would see a downward trend reversal as economic activity and financing conditions improve.
  • US elections: Markets repriced a Trump victory but forgot inflation. Following the presidential debate and the assassination attempt, markets are now positioning for a Trump victory in November. If this happens, we would expect an increased supply of US Treasuries to finance the higher deficit and a relatively higher neutral policy rate, which would lead to higher yields, and higher inflation expectations, trends that are already starting to be reflected in market pricing. But current market pricing may be underestimating the stagflationary risks embedded in Donald Trump’s campaign pledges (tariffs, fiscal, monetary, labor), posing downside risks for fixed income and equity markets à la 2022. 
  • Shipping costs: Preparing for trade war? After three months of declines, containership freight rates have surged back to the highs not seen since 2022. Though recovering demand and supply frictions play a role in driving up shipping costs, together accounting for 15% of the price deviation in Q2, oil prices are no longer having an impact. The anticipation channel seems to be going full steam: Donald Trump's potential re-election is fueling concerns about US-China trade and both US and European companies are pulling forward demand to account for disruptions. As a result, China's trade surplus reached a record high of USD99bn in June and other Asian economies are also benefiting. As long as the tensions in the Middle East linger, shipping costs will remain elevated, pushing up short-term earnings prospects for the shipping industry.
Ludovic Subran
Allianz SE
Ano Kuhanathan
Allianz Trade
Bjoern Griesbach
Allianz SE
Maria Latorre
Allianz Trade
Jordi Basco-Carrera
Allianz SE

Maxime Lemerle 

Allianz Trade