This month, it stated that the global economy grew by 3.0% in 2018, slightly lower than had been estimated halfway through the year.
Twice a year the World Bank releases estimates of how fast it expects the global economy to grow in the near term. In June 2018, the institution expected the global economy to grow by 3.1% in 2018. This month, it stated that the global economy grew by 3.0% in 2018, slightly lower than had been estimated halfway through the year.
Looking forward, the World Bank has now revised its estimate for the growth of the global economy downward by 0.1% for 2019. It now estimates that global growth in 2019 will be 2.9%. This slowdown in growth may occur for a variety of reasons, including trade concerns and troubles with currencies in emerging markets, according to The Wall Street Journal.
Global trade may not grow as fast as was previously forecast, contributing to the decline in the global growth rate. Part of that seems to be the result of the U.S. and some of its trading partners, notably China, engaging in trade disputes. If more restrictions on trade are put in place, that could result in less trade and a slowing of global growth.
Multiple emerging markets(NYSEARCA:EEM) have been hindered over the past year by currency crises, including Turkey and Argentina. When currencies are unstable, the prices of goods can fluctuate substantially and negatively impact the profitably of businesses who use those currencies.
According to Bloomberg, rising interest rates could also be contributing to slowing global growth. In the U.S., the Federal Reserve raised its federal funds target rate range four times in 2018. For 2019, it is predicted to do so two more times. Higher interest rates would make it more difficult for individuals and businesses to borrow money to fund purchases and fuel economic growth.
Even though the global economy has many headwinds that are causing projected growth to fall short of what was seen in 2018, a recession is not being forecast by the World Bank at this time and it appears that growth will remain positive.
Sectors: The average momentum score for the Sector Benchmark ETFs rose in the first week of the new year from -62.73 to -58.82, a small but significant change. The last few months have seen momentum scores in the Sector Edge trend downward, so a positive start to the new year is a good sign. Scores of the more defensive noncyclical sectors fell last week, while those of the more cyclical sectors increased, signaling a move by investors back into riskier sectors. Materials and Telecom (now called Communication Services by GICS) were the biggest gainers of the week, rising 33 and 30 points, respectively.
Factors: Among the Factor Benchmark ETFs, the average factor score increased from -67.25 to -57.58, signaling a slowing down of negative momentum trends. Yield, a top factor for the lion’s share of 2018, fell into a tie for the third spot last week. Sustainability, for the first time since we began tracking it as a factor, claimed the top spot, picking up 14 points for the week. Low Volatility and Dividend Growth remained near the top, and Small Size fell to the bottom spot. Small-cap stocks remain a battered asset, though they did experience some relief last week.
Global: The average Global Benchmark ETF momentum score saw a significant increase this week, moving from -51.45 to -31.73, as global regions across the board rose. Latin America, which has been quite volatile but generally strong in recent weeks, gained 52 points and moved into positive territory, the only region to do so this week. Other notable gainers included the Emerging Markets and EAFE regions. The United States remains at the bottom as domestic equity markets have struggled with weakening economic data and geopolitical concerns. A positive outcome in the U.S.-China trade negotiations this week could be a strong sign for both countries.