Global Investors’ Summit November 2018


Dec 19, 2018 | Rob Waldner and Tony Wong

Over 90 investors gathered in Atlanta in November to discuss and debate Invesco Fixed Income’s (IFI) views on global macroeconomic trends. Below, we discuss some of the major developments currently driving global macro performance, our outlook for key economies and how they influence our asset allocation decisions.

Key macro conclusions

  • In the US, we believe peak levels of growth are behind us and growth will likely moderate to around 2% by the end of 2019 as the effects of fiscal stimulus subside. Our below consensusinflation estimates for 2018 have been largely realized. Going forward, we expect core inflation to remain benign, increasing to around 2.5% in 2019, including the impact of recent tariffs, but remaining in line with the historical trend of around 2.3% if the impact of tariffs is excluded. US monetary policy will likely continue to tighten as the US Federal Reserve (Fed) continues its gradual hiking cycle, although slowing growth may force the Fed to pause.
  • European growth is slowing but is likely to remain above-potential in 2019 at around 1.6%, which should give rise to a gradual pickup in core inflation to around 1.3%. Monetary policy and political uncertainty are likely to be headwinds to growth as the European Central Bank (ECB) winds down its quantitative easing program and the euro area faces significant political risks in 2019: Italian budget concerns, Brexit and European Parliamentary elections in May.
  • We expect growth to stabilize in China as the effects of fiscal and monetary easing measures take hold. Monetary policy will likely remain accommodative in 2019, but we expect fiscal easing to be the main policy lever going forward, with a focus on additional tax cuts and support of private sector companies. Inflation will likely remain below the central bank’s “alert” level of 3%.
  • In Japan, we expect continued stable above-potential growth and benign inflation. However, the Bank of Japan will likely make further changes to its quantitative and qualitative easing program to curb possible negative effects on the government bond market and banking sector.
  • We believe there may be some recovery in emerging markets (EM) growth relative to expectations. Additionally, we expect stable-to-lower inflation and modest improvements in external accounts. EM will likely continue to be driven by changes in US macro conditions, especially the path of the US dollar, although we believe the market will be increasingly driven by idiosyncratic country and regional factors.


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