In this month’s Global Markets Overview:
- We highlight the main factors contributing to recent higher market volatility: a significant escalation in trade tensions between the US and China remains a plausible outcome; the Italian government and the European Commission continue to negotiate the 2019 Italian budget; Brent oil prices have declined around 30% since October to c.$60/bbl; and Brexit uncertainty remains, well, uncertain;
- Most importantly, this recent episode of higher market volatility is typical for economies in the late-stage of their business cycle;
- For 2019, we project growth in the major developed economies (e.g., US, Eurozone, and UK) to slow steadily to a bit below their long-term trend growth rates by the end of the year. While the drivers will be multi-faceted, we pay particular attention to the downward pressures on growth from the ongoing tightening of liquidity in the developed world, from both rising interest rates and the unwinding of quantitative easing by central banks.
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