Matthew J. Bartolini, CFA, Head of SPDR Americas Research
In this June edition of Charting the Market, we’ll look at what’s going on from a global economy perspective, including how trade tensions have impacted growth projections and sector performance.
We’ll also tackle the question of whether the current slowdown and movement in the yield curve means a recession is right around the corner—or not.
Chart #1: Global economic sentiment negative as manufacturing down
Global economic sentiment rolled over in 2018 and remains negative in 2019. Eurozone economic sentiment has been recovering since April on the heels of some improvement in manufacturing activities and better-than-expected Q1 GDP.
Most countries/regions, except the US, are now in contraction territory, as trade tensions escalated. US sentiment bottomed out in May but could face more stress in the coming months, as trade flare-ups may dent business sentiment further.
While the US has been at the forefront of trade tariff discussions, Germany has notably had a sizable downturn in its manufacturing indices due to its reliance on emerging market demand for the goods it produces.
What does it mean? We’ve been in a global economic slowdown for some time. And because leading economic indicators in the US have been moving lower year over year since November 2018, the US is experiencing a slowdown too.
My Take: The economic growth music is slowing, but it hasn’t stopped. And a slowdown doesn’t mean negative market returns. Quality has historically led amid slowdowns and it’s leading again this year, outperforming the broader market by 3.2%.
Still, investors will want to be judicious about where they allocate capital. Targeting quality stocks, as opposed to value or size, may be beneficial when there’s a stronger preference for sustainable cash flows.
For more, please read the rest of the post originally published on the SPDR Blog on June 14.
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