Global growth momentum slowed sharply in 2019 – TDS

James Rossiter , Head of Global Macro Strategy at TD Securities, notes that global growth momentum slowed sharply in 2019 and expects global growth to broadly move sideways in 2020, returning toward trend in H2.

Key Quotes

“Some recent December indicators point to upside risks, and in general, downside risks to global activity in early 2020 have abated. But it remains too early to take a strong signal from the upside (noisy) signals we see for December. A global economy that moves sideways--rather than softer--into the New Year remains the most likely outcome.”

“For markets, this growth backdrop meets a global real rate that looks set to remain around zero. A reduction of the downside risks and some improvement outside the US reduces the US growth dividend that has helped to benefit the USD. While the global economy lacks acceleration, the sprouting of green shoots and a reduction of trade and Brexit uncertainties should reinforce a positive feedback loop.”

“That should boost risk sentiment over the coming months, offering support to global carry and selective G10 currencies. US equities should lag ROW dynamics given positioning and valuation considerations. We think the EUR remains the funder of choice in H1 and yet it should participate in the USD downturn in H2. For now, it's a high-yield trade in currencies but that should also solidify the peak in the broad USD.”