The IMF presented its updated global macroeconomic outlook, in which the organisation admitted that their previous GDP growth forecast for 2019 and 2020 was too optimistic. As a result, they revised down the forecast for global growth to 3.5% and 3.6% in 2019 and 2020, respectively. Within the developed world, Germany’s growth prospects deteriorated to the greatest degree (-0.6ppt to 1.3% in 2019), while the US’s outlook remained unchanged at a solid pace (2.5% in 2019). Within the emerging universe, the GDP growth estimates for China (6.2%), India (7.5%) and Brazil (2.5%) were broadly unchanged for this year.
Although the IMF – again – fell behind the proverbial curve in terms of forecasting, the fact that the global economy has been slowing should be no surprise to investors, as both soft and hard indicators have been signalling the direction of travel. A significant degree of economic slowdown has already been priced into financial asset throughout 2H18, probably more than fundamentally warranted. We are of the view that the extent of the slowdown is over-discounted by markets, partly due to the prevalent political noises globally (e.g. trade tensions, Brexit, the partial government shutdown in the US, etc.). The spurring effect of the Fed’s ‘patient’ stance and the stimulus measures taken by the Chinese authorities will certainly materialise, the only question whether it materialises sooner or later.
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