Gauging Global Growth

As U.S. corporations begin to report their results for the recently completed first quarter of 2016, global growth will likely take center stage among investors. While comments from corporate managements on business conditions in Europe, Japan, China, and other emerging markets will be closely watched, those comments may be overshadowed. This week, the International Monetary Fund (IMF) will publish the spring edition of its World Economic Outlook publication. In addition, Christine Lagarde, the managing director of the IMF, will garner plenty of attention in the financial media, as she briefs investors on the publication and prepares for the IMF-World Bank spring meetings in Washington, DC. Although we don’t know what the IMF will forecast for global growth, if history is any guide, the global gross domestic product (GDP) forecasts for 2016 and 2017 should be lower than the forecasts made by the IMF last fall. Lagarde is also likely to remind policymakers (and investors) that central banks (via monetary policy) cannot boost global growth alone, and that fiscal policy is also required. Aside from a few countries, our view is that the call for more fiscal policy will go unheeded.

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