Concerns over a sharper slowdown in U.S., China and European growth have gripped market attention over the past few months. Headwinds from high debt/GDP ratios are a constraint for a number of countries, while debt servicing ratios have risen in the U.S. Globalization has also seen a setback, even if the U.S. and China reach a trade deal.
However, we maintain that the slowing of growth is modest. The underlying pace will be reasonable, helped by renewed China policy stimulation; the Fed pausing and the decline in oil prices since autumn 2018. A peak in USD, plus the beneficial short-term impact of oil prices on inflation, will be enough to relieve tightening pressures outside the U.S. and, in some cases, to allow mini-easing cycles.
What will all this mean for our economic policy and financial market forecasts? To hear our latest 2019 and 2020 views, please join our Outlook Conference Call on March 11.