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Our Continuing Downward Growth Spiral

May 16, 2016

The world is flat in terms of economics and global business. Goods made there are sold here and vice versa. Supply chains literally wrap around the globe.

 

Well now citizens and economies are behaving similarly. The Internal Monetary Fund calls it “cross-border economic integration.” To me, that’s a different way of saying an immigration crisis in affluent countries.

 

This phenomenon is behind the IMF’s latest growth forecast downgrade, which unfortunately isn’t the first one of 2016. In fact, it’s the fourth consecutive downgrade in the last year.

In October 2015 the IMF projected global economic growth of 3.6 percent. In January 2016 it dropped to 3.4 percent. The latest forecast calls for 3.2 percent global growth.

 

The effects are the most pronounced in the world’s major advanced economies. I’m talking about the U.S. Canada, the Euro Zone, the United Kingdom and Japan. That’s pretty much everybody.

 

“Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation,” IMF Chief Economist Maurice Obstfeld said when announcing the group’s report.

 

While global growth continues, its pace is disappointing and leaves economies open to negative risks. In essence, we can’t keep enduring disappointing growth that seemingly has no end in sight.

 

The domino effect of all those economies faltering could be huge. And the U.K. potentially exiting the European Union (voting takes place June 23) could be the initial piece to fall.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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