An economic advisory group sees the global economy slowing further this year but also said a recession was unlikely.
QMA’s Global Multi-Asset Solutions Group said in a release through Savvy Investor, that the outlook hinges on lingering trade uncertainty, a continued slowdown in China and the lag effect of tighter financial conditions in 2018.
GROWTH SLOWDOWN BOTTOM LIKELY
However, global growth was thought likely to bottom later this year because of the easing of financial conditions as Central Banks around the globe have turned dovish, the white paper said.
The US Federal Reserve has put rate hikes on hold, and the fed funds futures curve was suggesting the high probability of a rate cut by year end, the economists said.
Also, the European Central Bank has launched a new round of liquidity measures for banks and intends to leave rates unchanged. China, too, was stimulating its economy, and many Emerging Market central banks were following suit.
The ECB may have to remain dovish for a while since the Eurozone’s economy remains anemic. The economists said Italy and Germany were in, or near, recession.
US ECONOMY SLOWING ON ITS OWN
The economic outlook said the US economy was not immune to a global growth slowdown, but it was decelerating mostly because of fading fiscal stimulus and the effects of the previous interest rate hikes.
However, US economic growth was resilient compared with other regions, thanks to a strong labor market and rising wages, which lifts consumer spending, the economists said. They warned though that there were signs the US economy risked a downturn in 2020.
Geopolitical risks remained in place for world economies, the white paper said. These risks were especially meaningful in the context of a “hard Brexit” and US/China trade talks. However, a hard Brexit seemed unlikely, and US/China trade talks appeared to be head toward some kind of an agreement, minimizing the economic risks of failure.
“The past two quarters have seen a dramatic mood swing in risky assets,” the economists said. Things like slowing global growth, US Federal Open Market Committee hawkishness, continued trade tension between the US and China and a US government shutdown led to sharp market declines in the fourth quarter of last year.
Stock markets then rebounded sharply in the first quarter of this year to coincide with an abrupt dovish pivot by the FOMC and progress in US/China trade relations.
But concerns about global growth remain a risk, the economists said. There has been a drop in business confidence in Europe and China, and Brexit uncertainties highlight the risks to equities markets.
Because of all the uncertainty, stock prices may need to pull back or consolidate rather than continue the Q1 growth, they said. Yet the economists though the general trend should be up in the near term, underpinned by central bank dovishness and reasonably attractive prices.
CATTLE, BEEF RECAP
Cash cattle trading took place Wednesday in the Plains at $117 per cwt, down $3 to $4 from last week. No dressed-basis trade was established, but took place last week at $193 to $195 per cwt, down $5 to $7.
The USDA choice cutout Wednesday was down $0.55 per cwt at $219.57, while select was down $0.93 at $208.04. The choice/select spread widened to $11.53 from $11.15 with 105 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday, was $134.81 per cwt, down $0.26. This compares with Wednesday’s May contract settlement of $135.92, down $0.07.