MARKET UPDATE – JUNE 2019
The outlook for global growth has continued to deteriorate. The dovish tilt from the US and European central banks and yet more stimulus measures from the Chinese authorities generated some confidence that sluggish growth at the beginning of the year would mark the low point, but the prolonged period of uncertainty, with trade talks apparently stalled, tariffs rising and rhetoric worsening, in addition to the long-drawn out Brexit saga significantly lowers the probability of that second half revival. Indeed, GDP growth in Q1 appeared at first glance to be stronger than expected in the US (and the UK), but it is very clear that inventory build flattered the numbers significantly, a trend that has been confirmed in many company reports, particularly in the semi-conductor industry. Global PMI indicators suggest ongoing weakness in the months ahead, as do flattening yield curves. We have been saying for some months that if Brexit can at the very least be resolved in a positive way and a trade deal between China and the US concluded this would no doubt be a positive for the global economic outlook, but (as we have also been saying for some months) neither of these outcomes appears imminent.