13th February 2016
AXA Investment Managers expect global growth in 2016 to be its weakest since 2009
The AXA Investment Managers’ (AXA IM) research & investment strategy team have revised their forecasts for 2016. They have cut their global growth forecast for 2016 from 3.1% to 2.7%, on the back of weak data and tighter financial conditions. They expect the price of crude oil to stabilise at around $35 per barrel.
A summary of their main views are as follows:
• The main downward revisions are for the US and emerging markets. AXA IM expect the US to grow by only 1.7% this year, after 2.4% in 2015. US corporate profits should decline by 5%, squeezed between sluggish productivity and a global deflationary backdrop.
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• Monetary policies will be more expansionary than expected. AXA IM believes the Federal Reserve (Fed) will stay on hold until the end of the year, and the European Central Bank, Bank of Japan and People’s Bank of China will ease significantly further.
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• They do not see credible signs of an imminent US recession, nor do they see a crash landing in China as a significant risk at this stage.
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• While equities and high yield bonds look oversold and may rally in the next three months, they are cutting their medium and long term exposure to both asset classes.
• They are neutral on German government bonds and positive on peripheral European bonds. Longer term, they see value in investment grade bonds.
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• While risks to global growth seem evenly balanced, more systemic risks must be monitored. These incude Brexit, China policy change and unwelcome effects of the re-regulation of the banking sector, especially in Europe.
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