Risks to global economic growth are aplenty. A potential slowdown in China, trade wars, destabilization in the euro area, central bank liquidity traps and an unexpected rise in inflation are pointed out as the top five risks by asset managers. Most asset managers find the current global macroeconomic and investment environment to be slightly less supportive now than a year ago.
A global slowdown is imminent, feel experts. This bearishness isn’t surprising considering the deteriorating economic indicators across the world. The latest Purchasing Managers’ Index (PMI) readings for developed economies present a disappointing picture. The American economy is fast losing momentum. What’s more, the new export orders components of manufacturing PMIs remain very weak. Clearly, this does not bode well for global trade. Global central banks are expected to come to the rescue in the event of a major downturn. Global policymakers are expected to respond to the next economic downturn with more monetary stimulus.
Despite the odds, global equities are drawing comfort from renewed optimism around the US-China trade deal. But sentiment may turn sour if the deal fails again. Also, an economic slowdown will become difficult to ignore for equity markets as it starts reflecting in global corporate earnings, hurting overall returns.