Market Commentary 1 July - 30 September 2023
In some welcome news, the world economy is showing signs of resilience this year despite lingering inflation and a sluggish recovery in China. The International Monetary Fund (IMF) released its latest World Economic Outlook in July, where they noted this resilience is increasing the odds that a global recession may be avoided.
These signs of optimism may also give global policymakers additional confidence that their efforts to contain inflation without causing more serious economic harm, may be working. However, global growth remains weak by historical standards, and IMF economists warned that significant risks still exist, as the recovery from the pandemic and Russia’s invasion of Ukraine has been very slow. The succinct appraisal from IMF Chief Economist Pierre-Olivier Gourinchas, is that the global economy is “not yet out of the woods”.
Although the economic environment continues to require careful navigation by policymakers, the IMF raised its forecast for global growth this year to 3% (up from 2.8% in April). It also predicted that global inflation would continue to ease from 8.7% in 2022 to 6.8% this year and 5.2% in 2024, as the effects of higher interest rates filter throughout the world.
The outlook was rosier in large part because financial markets - which had been shaken by the collapse of several large banks in the United States and Europe earlier in the year - have largely stabilised.
Sadly, as we go to print, Palestinian militant groups led by Hamas launched a large-scale invasion against Israel from the Gaza Strip, triggering a swift response from the Israeli military. While geo-political conflict tends not to directly impact markets, all independent observers will be hoping for a speedy resolution.
Please don’t hesitate to contact us if you wish to discuss anything further.