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Are we headed for a global downturn? QMA’s Ed Campbell and the multi-asset solutions team weigh in.

October 17, 2018

The global economy enters the last quarter of 2018 with good momentum; however, growth has become less synchronized, more uneven and less robust than in 2017, with economic activity accelerating in the US, moderating in the eurozone, UK and Japan, and slowing in China and other emerging markets. In the US, consensus GDP growth forecasts for Q3 of 3 percent now look conservative, as the labor market and business confidence (especially small business) continue to get a boost from fiscal stimulus and strengthening capital spending.

In Europe, rolling shocks, including the Brexit stalemate, Italian fiscal stress, and possible fallout from the Turkish lira crisis on European banks have weighed on growth. Japan appears to have rebounded smartly from its contraction in Q1,but still appears set to grow at a slower pace this year than last.

Inflation shows a similar divergence, reaching central bank targets in the US and the UK, but lagging far behind in Europe and Japan. Thus, while policy normalization is the general theme, the major central banks remain at very different stages.

Trade tensions and the ongoing crisis in emerging markets top the downside risks. Trade uncertainty has now seeped into the GDP and business confidence data for Europe and Japan, while the combination of trade tensions, fears of Turkish lira contagion, and Fed rate hikes have contributed to slowdowns in a number of EMs, including China.

On balance: The near-term risk of a global downturn remains very low. But storm clouds are gathering.


Read the full QMA Q4 2018 Outlook & Review and more market views on

For a media interview with Ed Campbell to speak about market or economic conditions, please contact Judith Flynn.