Economic Update July 2019
Economic risks rise and markets rally
Global trade tensions remained a key focus of markets over recent weeks, clouding the outlook for economic growth. However, there has been some indication out of the G20 meeting in Osaka that US-China trade tensions will not deteriorate further in the near term. While US-China tensions may have eased, there are still concerns about US measures against Europe and Japan.
Global: Bond and equity markets
Bond and equity markets disagree on the economic outlook
Source: IFM Investors, MSCI, Macrobond
If trade tensions were not enough, US President Trump castigated European Central Bank (ECB) President Mario Draghi for his dovish shift in June (which contributed to a slide in the euro), claiming Draghi is manipulating the currency.
While central banks highlight downside risks, the signal from markets is less clear. Indeed, equity and bond markets can’t seem to agree on what the future may hold for the global economy. Equity markets remain well supported, whereas bond markets view central bank action as a warning.