Global macro shifts: Global growth: Headwinds or tailwinds?
This report presents a positive outlook on global growth, forecasting “sufficiently supportive” US and UK growth in 2015. Though discussing risks and inevitable market adjustments, the report emphasises the decline in oil prices’ potential to “differentiate between strong and poor performers” globally.
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OVERVIEW
United Kingdom and United States
The report predicts GDP growth to “remain strong” for the US and that there will be increased job creation in 2015 as unemployment levels continue to fall. Though the report acknowledges the UK’s similar progress, it warns that short-term tailwinds will eventually encounter hurdles from the nation’s “twin deficits in trade and public finance”, both of which are large.
Eurozone
Despite market pessimism surrounding the region, the report forecasts the Eurozone’s GDP growth to continue to improve due to quantitative easing by the European Central Bank (ECB) and exports bolstered by a weakened Euro, though it recognizes that it remains vulnerable and will continue to face structural weaknesses in the future.
China
The report presents China as a “well-managed and desirable” economy. Although many commentators view China’s growth slowdown as a significant headwind to global growth, the report states that China is settling into a lower trend growth path and that this is a welcome indication of its planned rebalancing away from its heavy reliance on fixed asset investment and exports.
Emerging markets
The report highlights the diverse range of risks to investing in emerging markets and frontier markets, as well as opportunities. These risks include various political, economic, social, and governance challenges that may impact regulations, pricing, and legal frameworks. The report supports a “fundamentals-driven” investment strategy, which should focus on different countries’ performance to create a tailored portfolio that adapts to specific financial demands.
ESG issues
The report does not give much attention to Environmental, Social, and Governance (ESG) issues. However, it highlights that investment strategies that are fundamentals-driven can enable investing in emerging markets with an ESG strategy. This may include democratic changes, moderate stability and human rights, and sustainable business practices.
Concluding thoughts
The paper ultimately stresses the positivity and health of the global economic outlook, with the decline in oil prices providing a much-needed lift to global growth and contributing to “an upside surprise to growth forecasts.” Though maintaining some caution, the paper emphasises the need to differentiate the “fundamentals-based” investment strategies that are critical for investing in various cross-country performances where opportunities arise.
