The change in tone by leading Central Banks in this week’s monetary updates came as no surprise given the latest downward revision of growth by institutions, such as the International Monetary Fund (IMF).

It is a fact that recent figures confirm a slowing growth trend and it is this trend that over the past days has conditioned monetary politicians.

Last Tuesday, the IMF once again, revised its global growth forecast lower citing that trade war tensions are one of the prime reasons for such downward revisions.

Interestingly enough in their report they pointed out the fact that a reverse in the recent loss of momentum is only possible if emerging markets manage to shift towards higher growth levels.

The forwarding looking statement was also quite concerning given that the risk of further downward revisions is high.

It is a reality that despite it seems that the trade war will be resolved, and this is our base case scenario, to date no official deal has been locked, notwithstanding markets have cheered investors in the first quarter of 2019. This is why I am of the belief that markets have only partially priced-in a trade war deal.

Undoubtedly, most of the year-to-date gains were triggered by the U-turn of primarily the Federal Reserve in terms of rate hikes for 2019 and the more than ever dovish stance by the European Central Bank.

Looking at the revisions per se, the Eurozone area continues to struggle partially conditioned by the ripple effect element of systematic risks, but also by the political uncertainty surrounding Italy, a very important contributor towards the Eurozone growth given the fact that it is the third largest economy within the zone.
Undoubtedly, the recent revised figures dented to a certain extent the recent momentum, which however continues to be mitigated by the re-affirmation of further support if need be by both the Fed and the ECB.

Moving forward, we believe that given a firm trade war deal, which we believe should be imminent, coupled with more positive data from China, as with the last PMI figure, we should continue to see the positive momentum sustained.

It is important to also keep in mind that the Chinese government is also pushing to maintain the mid-high single growth figure through stimulus both fiscal and monetary.

This is one of the reasons why the IMF increased its forecasts for China from the figures released in October 2018. Thus given a more easing path from leading Central Banks and more accommodative fiscal policies from China we should continue to see markets perform well in the second half of 2019.

Disclaimer: This article was issued by Jordan Portelli, investment manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt .The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.