Forecasts: Second Quarter 2019

  • Global economic growth appears likely to slow from 3.6% in 2018 to 3.4% in 2019, revisiting the lows of 2016. The latest downgrade to the outlook is primarily a function of dimmed expectations for the advanced economies, while prospects for the developing economies are not materially changed from several months ago.
  • Energy prices retain an outsized influence on global inflation dynamics. Inflation in the advanced economies reaccelerated in 2017–18 alongside oil prices, but is expected to ease by 0.4 percentage point to 1.6% in 2019.
  • Weaker data has led to a reassessment of the near-term outlook for monetary policy, by both markets and policymakers. The Federal Reserve shifted from projecting three rate hikes in 2019 to being on hold until 2020. Depending on how Brexit evolves, the Bank of England may be able to raise rates in 2019, but the ECB and Bank of Japan are unlikely to make a move this year.

Simona Mocuta
Senior Economist

  • While 2018 started out as a promising year, it ultimately proved to be difficult for emerging markets as twin headwinds of Fed tightening and a deepening US-China trade dispute took a toll. Instead of an expected uptick, performance actually moderated by 0.1% to 4.6%.
  • Risks stemming from the two challenges above appear to be fading; the Fed’s caution should alleviate pressure from EM currencies, while trade talks appear on a more positive footing.
  • Growth likely slips incrementally on average this year; it will likely stabilize in the second half and rebound modestly in 2020.

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  • Although economic growth downgrades were omnipresent during the first quarter, the related dovish shift from central banks and easing trade tensions allowed for plentiful gains across global stock markets.
  • US equities continue to look like a stable investment, but their relative outperformance has led them to make up a significant proportion of the global equity market — possibly constraining future relative returns.
  • Concerns abound about the state of credit markets, including the size and composition of debt burdens around the world, but shorter-term we continue to see a constructive environment for certain asset classes like high yield bonds


Basis Point One basis point is equal to one-hundredth of 1 percent, or 0.01%.

Capital Expenditure (Capex) refers to investment by a company to acquire or upgrade physical assets, such as a building, IT hardware or a new business.

Citigroup World Government Bond Index The WGBI is a widely used benchmark that currently comprises sovereign debt from over 20 countries, denominated in a variety of currencies.

Consumer Price Inflation (CPI) A widely used measure of inflation at the consumer level that helps to evaluate changes in cost of living.

Deflation A decrease in the general price level of goods and services over a given period.

GFC The global financial crisis, or GFC, refers to the period of extreme stress in financial markets and banking systems between mid-2007 and early 2009.

Goldman Sachs Commodities Index GSCI is the first major investable commodity index and includes the most liquid commodity futures.

Gross Domestic Product (GDP) The monetary value of all the finished goods and services produced within a country’s borders in a specific time period. Economic growth is typically expressed in terms of changes in GDP.

Group of Seven (G7) A group consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

MSCI EAFE Index An equities benchmark that captures large- and mid-cap representation across 22 developed market countries around the world, excluding the US and Canada.

MSCI Emerging Markets Index The MSCI Emerging Markets Index captures large and mid-cap representation across 23 emerging markets countries. With 834 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

MSCI World Index The MSCI World Index is a free-float weighted equity index. It includes about 1,600 stocks from developed world markets, and does not include emerging markets.

Organisation of Petroleum Exporting Countries (OPEC) 13-member group of oil exporting nations founded to manage global supply and coordinate pricing.

Personal Consumption Expenditures (PCE)
is the value of the goods and services purchased by US residents.

Phillips Curve a graphic representation of the relation between inflation and unemployment which indicates that as the rate of either increases the rate of the other declines.

Purchasing Managers’ Index An indicator of the economic health of the manufacturing and services sectors compiled from a survey of purchasing executives.

Quantitative Easing (QE) An extraordinary monetary policy measure in which a central bank buys government fixed-income securities to lower interest rates, encourage borrowing and stimulate economic activity.

Russell 2000 Index A benchmark that measures the performance of the small-capitalization segment of the US equity universe.

S&P 500 Total Return Index The benchmark that reflects returns after reinvestment of dividends of the 500 large cap stocks in the S&P 500 Index.

The US Dollar Index Measures the performance of the US Dollar against a basket of major currencies.

Value Added Tax (VAT) is a broadly-based consumption tax assessed on the value added to goods and services.

Yield Curve A graph or line that plots the yields of bonds with similar credit quality, typically from shortest to longest duration.