Rising interest rates in the US and firmer China policy remain a headwind to strong earnings. These headwinds have been intensified by the risk that trade wars could escalate.
This year, business expectation surveys have eased and signs have emerged of some softening in the US housing market. The lift in US rates has also increased stress on the more vulnerable emerging markets, particularly Turkey where the local currency has depreciated sharply.
Our scorecards signal that global growth momentum has peaked and is now gradually easing, primarily due to a modest slowdown in Europe and China and early signs that US momentum is now also easing.
Mixed signals in the short and long term
While our key indicators continue to suggest a slowdown, the strength of the negative signal is mild. There are also a number of other shorter-term indicators we believe are supportive of continued growth with financial conditions still supportive.
This leaves us at a point where we’re carefully balancing near-term upside potential from solid earnings with longer-term signals around 1 year forward that point to slower growth and returns. However, these indicators are still far from flashing recession signal.