This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

Broken Record

Finimize

Contributor:
Finimize
Visit: Finimize

What’s going on?

The global economy is stuck on a loop: the International Monetary Fund (IMF) – a sort of bank for countries – is anticipating a recession that’ll be at least as bad as after the 2008 financial crisis.

What does this mean?

Despite the massive programs put in place by central banks like the Federal Reserve, the Bank of England, and the European Central Bank – as well as government spending packages the world over – almost 80 countries have asked the IMF for emergency loans to help stabilize their economies.

Between that and the broader economic malaise, the IMF now predicts the global economy will shrink by 1.5% this year – not far off the 1.7% of 2009 (tweet this). And developed economies like the US, Europe, and Japan could feel it most keenly: they’ll collectively shrink more than 3% this year, according to the IMF’s forecast – even though they’re among those best prepared to weather the storm.

Why should I care?

The bigger picture: Backup’s arrived.

The IMF said it’s ready to lend its entire $1 trillion war chest to help countries get things under control – and it’s clearly optimistic about the effect of its contribution, having projected a rebound in growth for the global economy in 2021. But its forecast came with a familiar caveat: the faster the virus is stopped, the faster and stronger the recovery will be.

For markets: Tell them something they don’t know.

The forecast probably didn’t come as much of a surprise to investors: they generally have a handle on the state of the global economy by the time big institutions like the IMF refreshes its predictions, thanks to official data releases and investment bank economists’ own, much prompter updates. In this case, investors had probably already seen Morgan Stanley’s recent forecast of a 30% fall in annualized second-quarter economic growth in the US – even though the investment bank reckons the global economy will still grow this year overall.

Originally Posted on March 24, 2020 – Broken Record

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Finimize and is being posted with permission from Finimize. The views expressed in this material are solely those of the author and/or Finimize and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

trading top