Mid-month chart book

All cylinders of the world economy are simultaneously slowing down. Global services surveys are already in contraction, and manufacturing surveys are trending lower. Global recession this year is highly unlikely as we have already seen almost three-quarters of the year. We expect a 2.4% global economic growth rate in 2022, significantly lower than the International Monetary Fund's (IMF) estimate of 3.2%.

Under the slowing global economic backdrop, we prefer to remain significantly underweight in international developed markets. We believe that Europe is not only in a prolonged energy crisis but also in a leadership crisis. Liz Truss became the new Prime Minister of the UK after a polarizing internal election process within the Conservative Party. The Italian general election at the end of this month is expected to produce a far-right populist government under the leadership of Giorgia Meloni. Similarly, in Sweden, recent election results point to a new government after eight years of Social Democrat rule.

The U.S. economy's relatively better outlook is supported by better-than-expected employment data, which has supported the consumer amid high inflation. The U.S. dollar continues to be strong. Within a year, we expect the euro to drop to 90 cents to the U.S. dollar, the yen to 150, and the British pound to fall to parity until the general elections in 2024.

We also remain significantly underweight emerging market assets. Ukrainian advances against Russian forces are promising, but we are far away from sustainable peace negotiations.

In China, the drip-drip style fiscal and monetary stimulus is not enough to reverse the momentum of the economic slowdown. The zero-covid policy continues to limit mobility and curtails production in over 30 regions. Separately, India overtook the U.K.'s economy as the world's fifth largest. India could achieve an 8% economic growth rate this year and potentially deliver a 7% average growth rate over the next decade.