The World Bank is saying that the global economy is on course for its worst half decade for growth in 30 years. Growth is estimated to slow for a 3rd year in a row, from 2.6% in 2023, to 2.4% in 2024. While it could increase to 2.7% in 2025, it still represents a major relative slowdown in growth. My favorite quote was: “Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” noted by their Chief Economist. They cited debt, challenging access to food, geopolitical issues, and tight financial conditions in their report. They said that by the end of 2024, people in roughly 1 of 4 developing countries and 40% of low income countries will be poorer than in 2019, pre pandemic.
A China invasion of Taiwan is estimated to cost the world economy $10 tn, per BBG, which is roughly 10% of global GDP. The figure would be much larger than the Ukraine war, Covid and the Global Financial Crisis. So, let’s not go there, China, ok?
Investors are concerned about global governments’ “out of control” fiscal deficit, per the FT. Lots of debt + higher rates = challenging situation.
Samsung Electronics expects profits to decline by -35%; the co missed estimates due to weak chip demand, per Reuters. Microchip also guided down for 4Q23, per Reuters. They’re getting left in the dust by Nvidia, who launched new AI chips to enhance video games and editing tools, per Bloomberg.
HP may acquire Juniper Networks for ~$13B, per Reuters. Employees at the target are no doubt excited. In other deal news, > $6.4bn in deals have been announced at the JPM Healthcare conference in SF, per Bloomberg.
It certainly doesn’t make me feel confident that loose bolts are the reason behind the 737 MAX crisis for Boeing, per the FT.
UK stock funds are dealing with a 3rd year of outflows this past year, per Reuters. So, if you are a contrarian, start bargain hunting and consider your time frame. In other UK news, weak consumer confidence pressures UK retail spending in Dec, per the FT. So, timing matters. BlackRock warned that UK politicians may promise much greater spending in their bid to win this year’s election, and inflationary fiscal policy could drive a revolt in the bond market. But, don’t worry, UK. German industrial output posted its 6th consecutive monthly decline, per Reuters, so you are not alone in weakness.
That’s what investors are doing with Chinese stocks. Its share in a key EM index dropped to a record low, per Bloomberg. Although the gov is trying to get folks more excited, there has not been enough to get folks to wake up. Recently, its central bank said it could lower its reserve ratio. But, that could also have negative consequences. Stimulus is needed to jump start the economy, in our view.
Their equity markets were higher (Nikkei +1.16% and Topix +0.82%). But Tokyo core inflation slowed to its lowest level in more than 1 year while consumer spending fell for the 9th consecutive month, per Bloomberg. Rising living costs held back the spend. So, the relative outperformance is not based on strength in economic factors. Interestingly, the BOJ was a likely net seller of stocks in 2023, per the Nikkei.
Brent climbed after its largest drop in about a month. Investors are concerned about demand.