On Wednesday, April 15, the main stock indices in the world seem to be falling. In Europe, the German DAX loses over 1.5 percent, the French CAC40 almost 1.5 percent, and the British FTSE 100 less than 1 percent. (all indexes are available on the Conotoxia trading platform). Meanwhile, in the US futures also point to falls from 0.7 to around 1 percent.
It seems that sentiment on global markets has deteriorated, among others after the publication of the International Monetary Fund report, which indicates that the current crisis is the worst since the Great Depression in the United States. It could have been like a bucket of cold water for the hotheads of investors who counted on cheap money pumped into the markets by the US Federal Reserve and the government.
In its statement, the IMF compares the current situation with the times of the financial crisis a decade ago, indicating that current events are much worse for the global economy. During the global financial crisis in 2009, developed economies shrank by more than 3% in total. In turn, emerging markets avoided recession, growing by almost 3% y/y. It's supposed to be different now. According to April forecasts, the IMF expects that the GDP of developed economies will fall by 6.1 percent, and developing economies by 1 percent. Only China and India are expected to maintain any growth on an annual basis but at a level of 1.2 to 1.9 percent.
Meanwhile, the Italian or Spanish economies are to shrink by 9.1 and 8 percent, respectively. The GDP of the entire euro area may fall by as much as 7.5%, and the United States by almost 6%. These are much worse forecasts than what happened over a decade ago. At that time, the US GDP shrank by just over 2 percent and the euro area by over 4 percent. The IMF believes that the entire global economy may shrink by 3% in total in 2020.
These data may cool investors' emotions because they indicate a possible worse economic scenario than the one that may result from market valuations. Nobody knows what the second wave of infections will be in autumn – whether another lockdown will be needed and the economy will operate seasonally. The IMF reminded us that we are dealing with a very serious economic collapse, which some investors may have forgotten.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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