New Insights on the Global Economy
04/10/2014 12:01 am EST
For the week ahead, let’s look at the year ahead using the recent projections from the International Monetary Fund, sort of set a baseline for 2014. What the fund said, the good news, was that the chances of the global economy slipping back into recession had gone down from 6% last October to less than 1%, in fact to .01%, so, basically, the IMF said, “Don’t worry about that.” The baseline that the IMF sent and this is what I’d you to focus on if you’re looking at the market, is for decent growth. They’re basically talking about 3.6% growth for Global GDP. That’s low for Global GDP. Global GDP, since you have all of these fast growing developing economies like China out there, is usually more like 4.5%, 5%, 5.5%, something like that, but what the IMF is saying is that right now, we’re looking at a global economy that is being dominated in terms of growth by the developed economies. It’s the US that’s going to grow at 2.8% or the UK at 2.9% or Europe at 1 point nothing, Japan at 1.4%. These are the big growth engines. These are the places you’re seeing increased growth and in the developing world, what you’re seeing is a slow-down. It’s not that they’re going to gross less than those numbers, but in terms of what they used to do, so China won’t be growing at 9%, it might be growing at 7%, so what you get is a world that’s sort of slanted toward the lower growth rates of the developed economies and what that means is that you can sort of start to set your patterns for 2014. It means that commodities are probably not going to be a good place to be, at least industrial commodities, because China is after all 40% of the world demand for copper, so if China’s economy is not growing, it’s unlikely that copper prices are going to be going up. You can say that for iron, coal, all of those commodities, so a lower baseline, but still growth and that’s what you’ve got to look for as you try to figure out where to put your money in 2014.