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Insight Perspectives
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Unfortunately, the factors pose a risk to global growth,
which is also reflected in the 2016 Global Growth
Forecast - see the next page. Granted, the political
factor is often ignored by many investors and corporate
leaders; the timing and size of its impact is simply too
difficult to measure, they argue. This may be true; on
the other hand, it is not difficult to map a political
storyboard in Europe, which will give rise to more
serious political tensions in the coming years.
This would be bad news as many developed countries
cannot afford the economy coming to a standstill, since
they have used all monetary ammunition to create the
latest recovery. Indeed, since 2008, the developed
countries have front-loaded “future growth”, which will
be missing in the coming years. Furthermore, fiscal
policymakers in the same countries have seen their
fiscal debt situation continue to deteriorate, which
makes them even more vulnerable.
THE ECONOMY
In the short run, the
US economy
is still exposed to
significant tailwind from very low interest rates and
benign inflation. This, however, may soon come to an
end as the US Federal Reserve appears now to have
begun a long overdue monetary tightening process.
This will make the yield curve flatten, which is a
harbinger of slower growth from mid-2016.
Indeed, higher policy rates will turn the US economy
into a late-cycle economy. On the other hand, there are
no visible signs yet of an upcoming recession in the
United States. Granted, the manufacturing sector is
probably in recession, but this sector accounts for less
than 15% of GDP.