The world economy may be the rockiest it’s been since the financial crisis, but there are a growing
number of reasons to think it will prove short-lived.
Easy money – Since the Fed tightened rates last in December, financial conditions have loosened. The
S&P 500 has gained almost 20% from its December low, and an easing in U.S. dollar strength versus
2018 gave some breathing room to emerging markets. This reduced pressure on policymakers to guard
against capital flight by raising their own rates.
Less bad overseas data – Various indicators of global growth and demand gauges are firming, tempering
the flow of downbeat data coming out of 2018. Certain purchasing manager indexes are showing
improvement. And some of the international data is showing positive surprises. The Citi Economic
Surprise Index, which measures actual data against estimates, has rebounded to its best showing in five
Improving trade atmosphere – the biggest trade dispute on the global stage between the U.S. and China
is making progress, evidenced by the passing of March 1 without seeing the U.S. impose another round
of tariffs. Presidents Trump and Xi appear to be motivated parties who want to reach a deal and claim
some kind of victory.
Tight labor markets – it isn’t just U.S. employers struggling to fill open jobs, global markets continue to
tighten as well. JPMorgan Chase estimates unemployment in developed nations is now at a 40-year low
of 5 percent and set to fall further. As in the U.S., this supports expectations for continued wage growth
and provides reasons to expect continued growth in consumer spending and the businesses that
The global economy isn’t falling apart. Challenges remain, but the signals are turning up.