Global Economic Reports Are Surprising Investors In 2019
The state of the world economy has been touchy at best in recent months. With the prices of even the most valuable stock severely dropping in points, many investors saw it as a sign to run for the hills. But in all this turmoil there may be a silver lining worth watching out for.
During the 2018 year, the stock market saw a plummet in stocks from all directions. But 2019 saw the economy take center-stage when a bull market exploded mid-February. While that may not be an indication of a thriving economy, many investors hope it spells good things to come.
Glimmer of Hope
According to MarketWatch, “Global equity markets ended 2018 on a sour note, with the S&P 500 SPX, +0.36% dropping more than 9% in December to end the year down more than 6%, its worst annual performance since 2008. The Dow Jones Industrial Average DJIA, +0.36% fell 5.6% in 2018.”
Many events played a part in the negative numbers of each developed country’s economy, scaring many investors away. Countries whose economy center around tech and oil exporting may struggle far more than others. The economic growth for every country involved in trade began to slow severely.
SP Global says the slowing of the global economic growth is nothing to worry about. It is “both necessary and healthy.” We expected the process to be reasonably orderly. With recent bouts of market turbulence a reminder that slowdowns are not always smooth… Think of our last global crisis as the economy equivalent of the most recent devastating hurricane and the time after, of course, is when the economy has the chance to recover.
How 2019 Looks
With all the numbers looking so unpredictable for other countries, U.S. investors are acting pretty positively. Though there is still nervousness over the U.S. – China trade dispute, seeing the S&P 500 up more than 12% year to date and the Dow being up more than 10% leave an investor wanting to celebrate.
S&P Global’s numbers forecast “global growth will ease from a six-year high of 3.8% this year to 3.6% in 2019. This decline will take place in the two largest economies: the U.S. and China (comprising 40% of the world GDP).” Despite both economies being involved in a trade war or a semblance of one, both economies will take the negative effects of said war with ease.
China and India will also see a decrease in the growth of both of their economies. Some might say this is cause for alarm because they each contribute the most to global economic expansion.
Key Global Risks
“The top risk remains the impact on business and consumer sentiment, spending, and, ultimately, growth from the (temporarily paused) U.S.-China dispute.” This is indeed the source of most economic tension at the moment and according to S&P Global numbers, “the direct effects on growth in both countries from higher tariffs will be less than 1%.
During the G-20 summit, the U.S. – China hashed out a trade deal that experts say need to be monitored closely. Negotiations between the United States and places like Japan and the EU have yet to be ironed out.
MarketWatch tells that “Concerns about the Eurozone… have lingered as Italy entered a technical recession in the fourth quarter and Germany… slowed significantly. Economic data continued to disappoint in early 2019.” Although the numbers were in decline at the very beginning of the year, as time went on, the numbers stabilized, making investors happy.
When everyone’s number drop rapidly, it should be the time for concern. But statistics are showing us that the decline of growth is decreasing by 0.1% at most. Projections tell us that as long as numbers stay in the green, growth will speed up eventually.
Some might call what’s happening to the world economies a precursor to a recession on a global scale, but:
“Arguing that global growth must slow isn’t the same as saying that a crisis is coming. Some recent commentary seems to conflate the two. We fully agree that global growth will decline in the next year or two. This will be both necessary and healthy.”
There are also estimates that the United States economy may decrease between the 1%-2% range by mid-2020. The last time numbers like this for the U.S., it spelled the beginning of a recession. But global economists feel there’s no reason to believe that this time will be the same, despite the numbers.
Do you think there is another economic collapse on the rise? Are the fluctuating numbers true cause for concern or is the slowing of negative numbers a precursor to something changing for the better?