• DB’s thematic research team presents a fairly positive view of the global economy.
• The Phase 1 trade deal between the US and China, the Conservative party majority following the UK general election, and last year’s rate cuts by major central banks have all eased earlier downside risks.
• Top risks to this view are geopolitics (rising tensions in the Middle East) and trade (not just the next phase of US-China negotiations but also forthcoming US-EU and UK-EU trade negotiations). Lesser risks are recession, from weaker Chinese and European growth, and from Brexit.
• GDP growth expectations – Global: growth to accelerate to 3.3% in 2020. China: expected to remain at 6.1% as both consumption and exports lose momentum. US: moderate slowdown to 1.9% as a resilient consumer keeps the record-long expansion in place. Euro Area: subdued growth of 1% with downside risks from trade, Brexit, and pressure in the auto sector.
• Monetary policy set to remain accommodative. Fed and ECB on hold this year, BoE to cut in January, and China to maintain RRs after the cut in early January.
Why does this matter? Accelerating global growth and the Fed being on hold should keep equity markets on track for further gains this year and worries about corporate profits in check. EMs should benefit from an improved external environment and further space to cut rates where inflation allows. (Bullish global macro)
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