WLD

Growth through much of the post-pandemic period has defied traditional business-cycle analysis, and the noise-to-signal ratio in economic data remains extraordinarily high. Yet the sheer breadth and diversity of recession indicators that are currently flashing red in developed economies – inverted yield curves, tighter bank lending standards, weak manufacturing activity and depressed consumer confidence – would suggest that a deepening slowdown is underway. We think global growth rates will slow sequentially in the third and fourth quarters as the lagging impact of higher rates hits home and household demand continues to normalise relative to pre-pandemic levels. Corporate labour hoarding and...

The factors pushing volatility lower through the first half of the year are beginning to lose traction, and the list of outcomes that could topple prevailing market assumptions is multiplying: Long-term interest rates could yet revert higher if inflation rates remain elevated. A policy mistake could trigger a financial crisis or drive economies into recession more quickly than currently expected. A ceasefire in Ukraine could drive a reappraisal in global energy markets and lift the euro out of its malaise. An aggressive stimulus push from Chinese authorities might send commodity prices soaring. The artificial intelligence mania could reach new heights...

The dollar’s decline from its September highs could continue for several months yet, with depressed volatility supporting outward capital flows and limiting the currency’s safe-haven appeal. But the key conditions for a decisive move lower – a clear peak in US interest rates and a period of economic underperformance relative to the rest of the world – have yet to play out, and in the longer term, we think the risk outlook for other major trading blocs looks asymmetric, with structural vulnerabilities often outweighing the potential for sustained gains. The euro is, perhaps, the currency best positioned for outpeformance against...