In a recent survey of global market strategists, Natixis investment managers found that 47 percent of respondents thought geopolitical conflict was just as likely as consumer spending to be what ends the current market rally, making them the top two factors , who observe.

Meanwhile, nearly three-quarters (74 percent) of strategists see the U.S. presidential election as the biggest risk to markets, and 60 percent think the U.S. election will hinder rather than support the market.

In reality, Natixis said, politics is acting more like a “springboard” to what could derail the 2H24 outlook.

"The discussion may start with politics, but strategists recognize that this is only the first layer of a complex investment plan," the firm wrote.

"Politics may pose some key questions for strategists as they consider the outlook for the rest of the year, but over the longer term, economic and fiscal policy have a bigger impact on their market outlook."

As such, strategists consider how policy will affect four key macroeconomic factors in global markets: inflation, interest rates, public debt and economic growth.

Namely, almost half (47%) of respondents categorize inflation as a "medium" risk for 2H24, while 17% rate the risk as high.

However, inflation is falling, albeit slowly, and a majority of respondents (63 percent) say they are more concerned about the number of rate cuts than the timing of each cut.

"Most importantly, strategists believe interest rate changes should be managed across regions and are more concerned that rate cuts will be under-coordinated (60 percent) among central banks rather than over-coordinated (40 percent)," Natixis said.

Another key political factor weighing on the minds of the strategists surveyed was government debt, which has soared following massive cash injections into the global economy during the pandemic.

Specifically, 70 percent of strategists say government deficits matter when evaluating markets. As for how it affects their forecasts, responses were split: 53 percent said debt levels are sustainable now but pose a long-term threat to the economy, while 37 percent think levels are already unsustainable.

The rest (10 percent) believe that debt levels are sustainable in the long term.

In addition to its focus on the US for risk and return potential, Natixis strategists also bet that the US economy will continue to lead Europe in terms of growth in the second half of the year and that the latter will not be able to catch up with the US until late 2024 .

Looking at China, where growth is expected to reach 5.2% in 2023, less than a third of respondents believe growth will recover this year after the Chinese economy missed forecasts of 5.1% annual growth and comes at just 4.7 percent in 2Q24.