Mike Pyle
Global Chief Investment Strategist for BlackRock
Mike explains how our global outlook has evolved with the developing coronavirus outbreak.
We still expect the global growth to edge higher this year, even as the coronavirus outbreak has introduced uncertainties, as detailed in the February update of our Global Outlook. V-shaped recoveries in economic activities have often followed past epidemics – and we expect a repeat of this pattern. Yet the depth and width of the “V” this time are highly uncertain. This outbreak could be more disruptive than past ones because it could be more severe, and because of greater reliance on global supply chains.
Growth prospects have started to improve in key developed economies since late 2019. Our BlackRock Growth GPS, which aims to give a read of where consensus forecasts of real economic growth may stand in three months’ time, has shown an inflection in growth expectations for the U.S., the euro area, Japan and the UK. See the chart above. Growth momentum was also starting to recover in emerging markets (EM) late last year. The coronavirus outbreak has emerged as a principal risk to our global growth outlook. Historically the post-outbreak recoveries have often been fueled by the pent-up demand in retail and a restart of manufacturing sector. Yet key uncertainties around this outbreak may make history an unreliable guide. It is still too soon to gauge the magnitude and duration of this outbreak as well as its overall impact on the global economy........MUCH MORE
And from Lazard:
More central banks around the world cut interest rates (including the Federal Reserve and European Central Bank) in 2019 than in any other year since the global financial crisis (GFC) of 2008–09, and there were some welcome signs that further cuts in global economic growth estimates might not be necessary. Despite attractive valuations compared to bonds and inflation expectations, our assessment suggests there are now fewer things that can “go right” for equities over our 6–12 month investment horizon.The developing novel coronavirus (nCoV) global health emergency is a new uncertainty and is causing an immediate, substantial decline in economic activity in China and across Asia. This impact will continue for weeks (at least) or months (more probably), and will potentially wreak havoc among many companies’ supply and distribution chains. GDP growth in China could drop substantially in the current quarter, but is likely to rebound with help from monetary and fiscal stimulus programs, which we expect would be well-received by risk markets. Other central banks—including the Fed—might also stimulate if global growth wanes. The United Kingdom has left the European Union (EU) and the Phase 1 trade deal between the United States and China has been finalized. Neither event signals an end to policy uncertainties in these negotiations or even the beginning of the end. Perhaps instead—as Winston Churchill famously observed—it’s more like the end of the beginning.....MUCH MORE (3 page PDF)
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