Watch Video below to learn why the global economy is slowing based on recent forecasts by the IMF:
The International Monetary Fund (NYSE:IMF) is an international organization headquartered in Washington, D.C., consisting of "189 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
Recently, the IMF mentioned that the global expansion is weakening and at a rate that is somewhat faster than expected. They believe that the downward revisions are modest; however, they believe the risks to more significant downward corrections are rising. While financial markets (SPY) in advanced economies appeared to be decoupled from trade tensions for much of 2018, the two have become intertwined more recently, tightening financial conditions and escalating the risks to global growth.
The IMF projects that U.S. the World GDP will decline slightly by 0.2% in 2019. It is notable to see the downward GDP decline for both U.S., China, and Japan as well.
The U.S. expansion is expected to continue, but the forecast shows a deceleration with the unwinding of fiscal stimulus and also higher interest rates.
China’s growth slowdown could be faster than expected especially if trade tensions continue, and this can trigger abrupt sell-offs in financial and commodity markets as was the case in 2015–16. China's economy grew 6.6% in 2018, the lowest since 2009 amid trade war. China accounted for more than 36% of global GDP growth in 2016.
Investors primarily focuses on U.S., China, and Japan as they account for almost 50% of the global GDP. As a result, if all three countries are slowing quite materially, this bodes bad news for the rest of world. Investors should be cautious about investing in stocks as corporate earnings may have a lag time o actually show the slowdown. Some companies such as airline companies and Apple and chip maker companies have publicly stated a slowdown in their production. More companies are expected to reduce guidance in 2019.
(Source: World Bank)
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