IMF Warns Of "Sudden Repricing" In Asset Prices As It Trims Global Economic Outlook

The Washington-sponsored IMF is out with its latest set of guesses at global growth, warning that amid rising tensions over international trade, the broad global expansion that began roughly two years ago has plateaued and become less balanced.

The IMF still expects tax cuts to lift U.S. economic growth to 2.9 percent this year, up from 2.3 percent in 2017; but, citing proliferating trade conflicts, IMF chief economist Maury Obstfeld warned that "the risk of worse outcomes has increased" for the world economy.

The IMF reiterated its warning about the damage from a trade war, saying the outlook is “more fragile” and “under threat.”

“If current trade policy threats are realized and business confidence falls as a result, global output could be about 0.5 percent below current projections by 2020,”

It kept its forecast for 2018 global growth unchanged at 3.9 percent for now, but downgraded many major countries.

While the U.S. escaped thanks to a fiscal boost, the IMF cut projections for the euro area, Germany, France and the U.K. after weak -- weather-related -- first quarters and also lowered its outlook for Japan.

As always, The IMF says that Federal Reserve policy is central to global financial developments. Given strong US employment and firming inflation, the Fed is on track to continue raising interest rates over the next two years, tightening its monetary policy compared with other advanced economies and strengthening the US dollar.

Were the Fed to tighten faster than is currently expected, however, a broader range of countries could feel more intense pressures.

But the risk that current trade tensions escalate further - with adverse effects on confidence, asset prices, and investment - is the greatest near-term threat to global growth.

"Financial markets seem broadly complacent in the face of these contingencies, with elevated valuations and compressed spreads in many countries.

At the same time, however, high levels of public and private debt create widespread vulnerability.

Asset prices are no doubt buoyed, not only by easy financial conditions, but by the generally still satisfactory global growth picture.

They therefore are susceptible to sudden re-pricing if growth and expected corporate profits stall.

Supporting growth into the medium term—where trend growth rates are forecast to be lower for advanced economies and many commodity exporters—requires that policymakers act now to raise growth potential and resilience through reforms, while re-building fiscal buffers and guiding monetary policy carefully to keep inflation expectations well anchored on targets."

Additionally, the Washington-based global financial institution warned governments that income inequality should become a priority.

"Otherwise, the political future will only darken."

Adding a jab at Trump's "America First" world view:

"While rising to these challenges, countries must resist inward-looking thinking and remember that on a range of problems of common interest, multilateral cooperation is vital. "

Finally, we note that the fund did not directly address what might happen when the US imposes full sanctions and secondary sanctions on Iran in November.

So, what to do with this new information from The IMF? Simple - Buy FAANG Stocks...

 

Comments

toady Mon, 07/16/2018 - 10:23 Permalink

Go buy something, quick!

Seriously though, if you have a large purchase pending , get it done, the gouge is coming soon.

My builder is trying to tack $10k on to his estimate, saying lumber prices are skyrocketing. I point out that all the lumber is already on site, and it was purchased at the pre-price-spike amount from the original estimate. He just stands there shrugging.

toady tmosley Mon, 07/16/2018 - 11:24 Permalink

Pretty sure he's gonna quit. Usually the bank/builder forces the person paying to build to get a loan for the builder to access as they see fit (essentially a "blank check")

Lucky for me, I have the full amount in cash, so I just needed to give access to the builder. It's a longtime account that I can see online. That's how I caught the extra 10k.

Now the builder is caught, and he's pissed off. Hasn't shown up for a week, refuses to produce a receipt explaining the extra 10k, etc.

My boy is camping at the site to make sure the lumber/material doesn't "disappear" overnight.

In reply to by tmosley

LawsofPhysics Mon, 07/16/2018 - 10:26 Permalink

"repricing"?  LOL!!!  Price in what, exactly?

Talking about "prices" in the absence a mechanism for true price discovery is fucking stupid!

LMFAO!!!!

"Full Faith and Credit"

same as it ever was!!!!

buzzsaw99 Mon, 07/16/2018 - 10:27 Permalink

this anti-american report was paid for by usa taxpayers.

...we're not going to sit here and listen to you badmouth the united states of america.  [/otter]

Pandelis Mon, 07/16/2018 - 10:27 Permalink

With all due respect to Mr. Maury Obstfeld what does he knows that none else does ???

 

another Anti - MAGA type of people? common give it up .. trump won the elections

BandGap Mon, 07/16/2018 - 10:29 Permalink

When you "misremember" it means you forgot and get to lie with a straight face.

When assets are "repriced suddenly" it means the music has stopped and there are 50 people vying for 5 chairs on the deck of the Titanic.

Everything is fine until I misremember the part about price discovery being the lynchpin of asset valuation.

I grow weary in this dimension.

 

Fantasy Free E… Mon, 07/16/2018 - 10:42 Permalink

Sadly all economies in the world are dependent on asset prices continuing to rise. Yet, what happens if asset prices can no longer be pushed higher under any circumstances? This is a real dilemma for world leaders who we cannot assume are even aware of the relationship. Do not think there is no ignorance at the top because there is more than you would ever believe.  http://quillian.net/blog/cabbage-head-theory-disproved/

Gophamet Mon, 07/16/2018 - 10:50 Permalink

More charts, graphs and office chairs that smell like ass. Accountability runs deep when the only skin you have in the game sloughed off on the toilet seat!

MrBoompi Mon, 07/16/2018 - 11:25 Permalink

We have always suffered with "sudden asset re-pricing".  It's how the truly rich maintain their wealth.  If you want to buy a financial asset in any significant quantity, the price suddenly goes up.  If you want to sell the price goes down.  These fuckers manipulate LIBOR and FX on a daily basis, as well as stocks and commodities.  Front-running and price manipulation seem to be an accepted business model now, since the fines, if you're caught, are miniscule.  

moonmac Mon, 07/16/2018 - 11:41 Permalink

Biggest PVF distributer in the USA had a terrible June. July will be even worse. Demand was driven forward to the point of no return!

Let it Go Mon, 07/16/2018 - 20:06 Permalink

Among all the recent news about euphoria and a market "melt-up" several reasons exist to be cautious. During the last two and a half years central banks and countries around the world have added more fuel to the fire which has postponed the day of reckoning. This has made all of us thinking the market was about to turn south looking rather silly and underscores the fact that trying to time economic events is both confusing and complex. Still, the fact the numbers do not work means reality will be visiting us soon. The reasoning is outlined below.

http://Economic Reality Will Soon Be Knocking On The Gate.html