by InteractiveAdvisors
by InteractiveAdvisors
Outlook

Global forecasts are little changed

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By: Simona M Mocuta, Chief Economist, Elliot Hentov, Ph.D., Head of Macro Policy Research, Vladimir Gorshkov, CFA, Macro Policy Strategist, Amy Le, CFA, Investment Strategist, and Venkata Vamsea Krishna Bhimavarapu, Economist

The inflation story is progressing roughly as anticipated, with the caveat that the disinflation process had paused in the US earlier this year. We, however, see this as a temporary phenomenon.

Considerable Market Volatility

Since our last update in March, the global economy has progressed largely as anticipated. Global growth remains moderate but steady, with broadening signs of a bottoming out in manufacturing, improvement in Europe and a visible deceleration in the US. Chinese economic growth has stabilized but remains constrained, with weak consumer sentiment and ongoing challenges in the property sector. Consequently, there has been no change to the global growth forecast this quarter, and only modest adjustments to individual countries.

The inflation story is also progressing roughly as anticipated, with the caveat that the disinflation process had paused in the US earlier this year, while continuing to unfold elsewhere. We see this as a temporary phenomenon driven largely by peculiarities around shelter inflation calculations in the US and a delayed catch-up cycle in insurance (home and auto). US inflationary pressures are increasingly narrow and, given normalizing labor markets and anchored inflation expectations, the disinflation process is set to resume. The much-improved May inflation report supports this interpretation. For now, the Fed has remained on the sidelines even as other developed market central banks (most recently, the ECB and Bank of Canada) have started lowering interest rates. Nevertheless, the Fed might join the easing cycle later in the year and quicken it in 2025. The “different speeds, same direction” mantra we applied to global disinflation in 2023 applies to global policy easing in 2024-25.

Political and geopolitical risks loom large. Elections in Mexico, India, and the European Union all brought surprising outcomes, highlighting the limitations of forecasting exercises. As we gear up for US elections in November, investors are bound to grapple with rising volatility. Risks to all forecasts are elevated and two-sided.

This post first appeared on June 17th 2024, SSGA Blog

PHOTO CREDIT: https://www.shutterstock.com/g/HTWE

Via SHUTTERSTOCK

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State Street Global Advisors
State Street Global Advisors
For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of active and index strategies to create cost-effective solutions. As stewards, we help portfolio companies see that what is fair for people and sustainable for the planet can deliver long-term performance. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s third largest asset manager with US $2.72 trillion* under our care. While State Street licenses model portfolio data enabling Interactive Advisors to build and periodically rebalance these portfolios, State Street does not have trading discretion, and it is not an adviser or fiduciary to Interactive Advisors clients investing in these portfolios. *AUM reflects approximately $32.9 billion (as of June 30, 2018), with respect to which State Street Global Advisors Funds Distributors, LLC (SSGA FD) serves as marketing agent; SSGA FD and State Street Global Advisors are affiliated.

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