Economic and Strategy Viewpoint - June 2018


Keith Wade

Keith Wade

Chief Economist & Strategist

Azad Zangana

Azad Zangana

Senior European Economist and Strategist

Craig Botham

Craig Botham

Senior Emerging Markets Economist

Forecast update: growth peaking, inflation rising

  • Global growth remains robust, but we have revised down our forecast for 2018 to 3.4% from 3.5%. This largely reflects a soft start to the year in many economies, higher oil prices and increased concerns over trade relations between the US and China. This represents the first downgrade to growth since September 2016.
  • Monetary policy is expected to tighten across the developed world over the forecast period with the Federal Reserve hiking to 3% by mid next year, the European Central Bank ending quantitative easing purchases in Q4 this year and raising rates in 2019. Some adjustment of Bank of Japan policy can also be expected.
  • The world economy is still in the expansion mode, but the forecast indicates that a more stagflationary period may lie ahead and the risks around the forecast are in this direction.

European forecast update: a frosty start to 2018

  • The eurozone economy has experienced a largely unexpected slowdown, calling into question the durability of the recovery. While poor weather may have been to blame, leading indicators have failed to recover. Meanwhile, political risk in Italy has returned as the two biggest populist parties join forces to form a government. 
  • The UK appears to have suffered a similarly poor start to 2018. The good news is that a Brexit transition deal appears to have been agreed. The bad news is that uncertainty appears to be having a larger impact on confidence and house prices than previously feared.

EM forecast update: turbulence interrupts a smooth flight

  • Broadly lower growth and higher inflation compared to our previous forecast for emerging markets (EM). The culprits are, in the main, a weaker than expected first quarter and much higher oil prices, though sanctions and trade tensions also weigh on activity.
  • Higher inflation should close the door on further rate cuts for most of EM, though we think Russia still has space for one more. Otherwise, the next moves in Brazil and India seem likely to be hikes

The full PDF is available below.

Read the full report

Economic and Strategy Viewpoint - June 2018 25 pages | 669 kb

download

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  The content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.

Contact Schroders Wealth Management

To discuss your wealth management requirements, or to find out more about our services and how we can help you, please contact:

Marc Brodard

Marc Brodard

Head of Private Clients - Switzerland
Telephone:
marc.brodard@schroders.com