The Davos Economic Forum is an event that attracts dignitaries, billionaires, hedge fund managers, and investors from around the world. This year’s forum gives the world an economic update, so investors usually pay attention to the economic information that surfaces during the Switzerland summit. But the latest report from Davos doesn’t look promising for investors. The information coming out of Davos offers a good counterbalance for the excitement some investors feel about 2019 asset growth.
The International Monetary Fund let the world know global economic growth in 2019 should end up at 3.5 percent. Global economic growth in 2020 will only be 3.6 percent. Those projects replace the projects made by the IMF in October 2018. The current projections are 0.2 percent and 0.1 percent below the October growth projections. According to the IMF, the trade war with China, the unhealthy financial conditions in Europe, and the slowdown in China’s economy are the villains that may disrupt investment strategies over the next two years.
Economic growth in the United States will be a lethargic 2.5 percent in 2019, and that percentage will drop to 1.9 percent in 2020. Part of the slowdown is the result of Trump’s tax cuts raising the deficit, and higher interest rates, as well as Trump obsession to make the Chinese change the way they trade with the United States. The IMF claims the hot start to the stock market in 2019 will fizzle as the national deficit continues to grow, the farmers lose more business from Trump’s tariffs and the uncertainties that surround Mr. Trump’s political and personal decisions.
European economic growth in 2019 may only be 0.7 percent. That’s down from 3.8 percent in 2018. But European growth in 2020 should be around 2.4 percent. Slow economic growth in Italy, Germany, and France will continue, and Turkey’s economic policies will play a role in poor European performance. China’s growth will only hit 6.2 percent in 2019. That’s down from 6.6 percent in 2018. And 2020 growth in China will be the same as 2019’s growth percentage. The growth in other Asian markets will hit 6.3 percent in 2019, and 6.4 percent in 2020, according to the IMF.
The IMF based those projections on the Trump tariffs and his trade war with China. The IMF doesn’t expect a resolution to the trade war in March 2019. In other words, some investors may not realize what slow growth in China and the trade war means in terms of asset protection as well as growth. China’s economic slowdown impacts global growth, according to the IMF. The IMF thinks a global recession is a real possibility by the end of 2019.