Bank of America now forecasts global GDP growth of 2.8%, the slowest since 2009
THE SPEED of the sell-off in global stockmarkets is remarkable. On February 19th the S&P 500, America’s main index, reached a record high. Little more than a week later, it has lost one-eighth of its value. The change in mood is astonishing. Last year was the best for global equities since 2009, with the MSCI world index rising 24%. A week of turmoil finished only when traders headed home for the weekend on February 28th. Japan’s Topix index had fallen by 9.7%, the Euro Stoxx 50 by 12.
In early February, investors’ main assumption was that the virus’s impact on the global economy would be felt through disruption to the global supply chain, caused by the extended shutdown of Chinese factories , and through reduced Chinese demand for commodities. Bloomberg’s commodity index fell by 9.3% between January 6th and February 3rd.
All this has caused economists and analysts to revise their forecasts for this year. Bank of America forecasts global GDP growth of 2.8%, the slowest since 2009. Citigroup now thinks global corporate earnings will not grow at all this year; before the virus worsened, the consensus was that they would rise by 9%. The upending of these forecasts alone can explain much of the stockmarket’s decline.
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