The global economic picture remains mixed. However, in recent weeks central banks both in Europe and the U.S. have suggested that they may take action relatively soon to help support economic growth should they need to. So far, for the global markets at least, the potential positive from central banks providing some protection if the economy falters has offset some negatives in recent economic news. Nonetheless, this is a finely balanced situation. Much depends on future economic reports and how central banks set policy.
The current positives include the U.S. where the economy is performing reasonably well, and that there are no major regions of the world seeing severe economic contraction. Also, if central banks do embark on a new set of rate cuts and other policies to help growth that may meaningfully help markets. Plus, in Turkey, which is a hotspot today, political tensions may have reduced somewhat as the results of the recent rerun of the Istanbul election were respected by the ruling party that had disputed the prior vote.
However, negatives remain too. For example, even in the U.S., which is seeing economic growth, the manufacturing sector may be slowing, and the European economy is fairly sluggish. Also, China, recently a major source of global growth, appears to be slowing. This is due in part, to the trade war with the U.S.. Iranian tensions too, could impact the global economy, this is because the Strait of Hormuz just south of Iran, is a major transport link for the world’s oil supply, so major conflict there may raise oil prices and, in turn, hurt growth.
Thus, the picture remains relatively finely balanced. It’s a positive that central banks are keen to step in should growth falter further. However, of course, they will only do this if the economic picture is gloomy, so it’s not a clear positive if central banks do take action. Plus, there’s no guarantee that interest rate measures will be large enough or fast enough to offset a growth slump. It remains to be seen whether what we’re seeing today is just a minor dip in growth as has happened various times now since the last recession, or a more substantial decline. We should also not ignore that today the growth picture, though not ideal, is reasonably positive and much of the concern is around whether things do get worse from current levels.