img 3366 - Macro overview

Macro overview

Trade risks cloud ‘Goldilocks’ drift

• Core scenario: Our Global Investment Committee expects global growth to stabilise at a moderate pace, suppressed by renewed trade uncertainty, which we now believe may persist into Q3. Inflation is likely to stay subdued, despite the rebound in oil prices.

• Policy outlook: Moderating growth and below-target inflation are likely to allow the Fed, ECB and BoJ to stay on hold. China’s central bank is likely to ease policy further to support growth.

• Key risks: Prolonged trade uncertainty and geopolitics are the biggest downside risks to global growth. Further stimulus in China and Fed rate cuts can potentially deliver the biggest upside risk to the outlook.

Core scenario

Our Global Investment Committee maintains its assessment that global growth is likely to stabilise at a more moderate and sustainable pace over the next 12 months, despite the revival of US-China tensions. While the trade uncertainty could drag on for a few more months, financial conditions have eased significantly in the US since the start of the year and China is likely to keep gradually relaxing its fiscal and credit policies to support growth. Meanwhile, inflation remains below central bank targets globally. This ‘Goldilocks’ combination should allow the Fed, ECB and BoJ to stay accommodative, at least for the rest of 2019. An all-out trade war (not our base case) is the biggest risk to this constructive outlook.

img 3366 - Macro overviewIMPLICATIONS


The Fed to hold rates for rest of 2019

The ECB and BoJ to maintain their highly accommodative monetary policies

China to progressively ease fiscal and monetary policies to support domestic-driven growth