Macroeconomic & Geopolitical

January Macro Dashboard

February 2020 – 10 min read
Despite Japan's GDP likely to slow in 2019Q4, global growth is set to stabilize and strengthen this year as the European economy stabilizes and the U.S. consumer is expected to continue driving growth.

Global growth is set to stabilize and strengthen this year as trade tensions and political uncertainty ease, monetary policy remains accommodative, and manufacturing improves. However, risks are tilted to the downside. Growth is expected to be concentrated in the second half of the year, as the factors weighing on growth in 2019 subside. January flash PMIs largely surprised to the upside, with improvement in manufacturing. A clearer path forward with Brexit will bode well for the U.K. and Euro Area, while the ‘Phase One’ deal will aid global demand and trade. However, U.S.-EU trade tensions, coronavirus, rising Middle East tensions, and the Boeing production halt pose threats to the outlook.

Regionally, the U.S. consumer will continue to drive growth, albeit at a more moderate pace, as spending comes back in-line with income growth. Residential investment will aid GDP growth, and trade will be a modest contributor. However, trade tensions, tempered global demand, and the Boeing production halt will weigh on manufacturing and business investment. The FOMC is likely to remain on hold in the near-term as inflation and wage pressures remain subdued, while a solid labor market and services sector keep the economy on the right path. The ‘Phase One’ deal with China will be beneficial to the agriculture sector, but any increase in tensions with other trading partners would weigh on the outlook.

There are signs of stabilization in the European economy as uncertainty wanes and global demand rises, but risks remain tilted to the downside. Manufacturing PMIs turned higher in January—but remain in contractionary territory—confirming a bottoming in the manufacturing sector. The service sector is holding up well and the consumer will continue to drive growth. Confidence in Germany is improving amid waning trade tensions, and a post-election boost is afoot in the U.K., which will be a positive for global growth. However, U.S.-EU trade tensions and uncertainty surrounding post-Brexit trade negotiations act as downside risks.

Growth in Japan’s GDP is likely to slow in 2019Q4, weighed down by the consumption tax hike and the tsunami. However, growth is expected to stabilize and strengthen in 2020 as these weights fade, fiscal stimulus is implemented, and global demand rises. China’s path forward is more uncertain; while better-than-expected activity data, solid Q4 GDP data, and easing trade tensions portend stronger growth, the coronavirus outbreak during the Lunar New Year could reduce growth. Monetary policy will remain accommodative, and demand in the region is expected to improve. If the outbreak significantly weighs on China’s GDP growth, both fiscal and monetary policy could turn more accommodative in the near-term.

Want to read the full article?

View PDF

Christopher Smart, PhD, CFA

Chief Global Strategist & Head of the Barings Investment Institute

Any forecasts in this material are based upon Barings opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Investment involves risk. The value of any investments and any income generated may go down as well as up and is not guaranteed by Barings or any other person. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Any investment results, portfolio compositions and or examples set forth in this material are provided for illustrative purposes only and are not indicative of any future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this material No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of investments. Prospective investors should read the offering documents, if applicable, for the details and specific risk factors of any Fund/Strategy discussed in this material.

Barings is the brand name for the worldwide asset management and associated businesses of Barings LLC and its global affiliates. Barings Securities LLC, Barings (U.K.) Limited, Barings Global Advisers Limited, Barings Australia Pty Ltd, Barings Japan Limited, Baring Asset Management Limited, Baring International Investment Limited, Baring Fund Managers Limited, Baring International Fund Managers (Ireland) Limited, Baring Asset Management (Asia) Limited, Baring SICE (Taiwan) Limited, Baring Asset Management Switzerland Sarl, and Baring Asset Management Korea Limited each are affiliated financial service companies owned by Barings LLC (each, individually, an “Affiliate”).

NO OFFER: The material is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument or service in any jurisdiction. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This material is not, and must not be treated as, investment advice, an investment recommendation, investment research, or a recommendation about the suitability or appropriateness of any security, commodity, investment, or particular investment strategy, and must not be construed as a projection or prediction.

Unless otherwise mentioned, the views contained in this material are those of Barings. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Individual portfolio management teams may hold different views than the views expressed herein and may make different investment decisions for different clients. Parts of this material may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this material is accurate, Barings makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information.

Any service, security, investment or product outlined in this material may not be suitable for a prospective investor or available in their jurisdiction. Copyright in this material is owned by Barings. Information in this material may be used for your own personal use, but may not be altered, reproduced or distributed without Barings’ consent.