Global growth momentum has slowed amid the continued overhang of trade tensions and a broad repricing of risks assets following recent Fed rate hikes.
Key Macro Themes
- Global growth is still set to expand in 2019, but momentum has slowed with the U.S. leveling off, European growth receding and China continuing to slow. The roll over in the global PMI continues, yet market estimates for 2019 growth are only slightly below the 2018 level. Global growth may start to become more synchronized to the downside with the U.S. still outperforming on a relative basis.
- Trade tensions remain an overhang on the global growth outlook. Chinese demand for U.S. exports has fallen sharply, highlighted by Apple’s recent downward revenue guidance as well as weaker U.S.-China trade data. The populism movement in Europe continues to add uncertainty and political risk. French fuel tax hike protests, the U.K.’s unresolved Brexit issue and Italy’s budget showdown with the EU have all added opaqueness to general market conditions.
- Recent Fed rate hikes, balance sheet reduction and USD strength have combined to tighten global liquidity conditions and add to market volatility. Lower energy prices should provide some support to more consumer-oriented economies and continue to alleviate headline inflation.
- Overall, macro fundamentals currently appear sound but the