A recovering global economy?
In recent weeks, the scenario of a recovering global economy has become more likely. In line with the textbook, share prices have been up, and the prices of safe government bonds have been down.
In addition, the US dollar, inherently often anti-cyclical, has depreciated against a currency basket. In this blog entry, we want to discuss the reasons for this development and the necessary conditions for its continuation.
- he outlook on an agreement in the conflict between the USA and China has improved. While said agreement will probably not affect all areas of conflict (trade, technology, finance, currency, patents), both countries might agree on a truce. This means that the downside risks (tail risks) for the global economy have decreased.
- The signs of stabilisation in the weak, i.e. hardly growing sectors of the global economy have increased. This applies to industrial production as well as corporate capital expenditure. The global purchasing managers’ index in the manufacturing sector is an important indicator in this context. In October, it recorded its third consecutive increase. The indicator that has recorded the most significant decline since the beginning of 2018, i.e. the sentiment in the business sector, has shown signs of bottoming out.
- Indeed, sentiment indicators have generally fallen more significantly than the indicators rooted in the real economy (production, consumption). Constructive events with regard to global and geopolitical uncertainties would have the power to set off a trend reversal.