Global Growth Stabilizing

Economic Blog
November 14, 2019

The long wait may be over. No, we aren’t talking about a U.S.-China trade agreement, though that may come before the end of this year. The two sides continue working on a few sticking points.

We’re talking about stabilizing global growth, which has been elusive over the past two years.

Global manufacturing surveys for October point to improvement. The JPMorgan Global Manufacturing Purchasing Manager’s Index (PMI) has increased three consecutive months to within an eyelash of the key 50 level, marking the breakpoint between expansion and contraction.

More evidence of stabilizing global economic growth came this week from the Organisation for Economic Co-operation and Development (OECD). The OECD’s Leading Indicators reflected an upgraded and stable growth outlook for Europe, Japan, and Russia, and a continued stable outlook for China. The only country to see its outlook downgraded was the United Kingdom (U.K.), likely because of the uncertainty around the country’s impending exit from the European Union (Brexit).

“Economic momentum has slowed some in the United States due to trade tensions and weak business investment, while Brexit has been a drag on U.K. growth,” noted LPL Senior Market Strategist Ryan Detrick. “Signs of stabilization in Europe and Japan coupled with recent progress on trade point to an improving outlook for global economic growth and suggest that the recent improvement in global equity market performance may not be a fluke.”

After fits and starts over the past several years, we will be watching closely to see if better performance in global markets can continue. We continue to recommend long-term strategic investors consider holding globally diversified equity portfolios.

For more tactical investors heavily concentrated in the United States, as we wrote here last week, it may be a good time to start looking outside our borders. We aren’t ready to recommend equities in developed international markets over their U.S. counterparts, but the balance of power may be shifting. Stay tuned.

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