What’s Going On Here?The International Monetary Fund (IMF) gave a grim outlook for the global economy on Tuesday. What Does This Mean?The global economy’s taking a real beating these days. For one, China’s faltering housing market and unwavering commitment to its zero-Covid policy are curbing the world’s manufacturing powerhouse and second-biggest economy. And for another, fallout from war in Europe is still sending global food and energy prices through the roof. Central banks, for their part, have been raising interest rates in a bid to soften hard-hitting inflation, but that move risks scuppering economies the world over. And while the IMF believes those banks should stick to their inflation-fighting guns, it thinks things will get worse before they get better. In fact, the fund expects the global economy to grow a measly 2.7% next year, saying around a third of the world’s economies might even shrink. And when you strip out the pandemic and 2008’s financial crisis, that’s the most pessimistic forecast the IMF has published since 2001. Why Should I Care?Zooming in: The dollar’s dominating.
The Federal Reserve’s one central bank that’s aggressively hoisted rates recently, and that’s bolstered the US dollar. The IMF thinks that’s a massive risk for the many countries – not least those in emerging markets – that hold dollar-denominated debt, as those payments are already growing far loftier. And with more fearful investors likely to flock to safe-haven investments like US government bonds, the dollar might be poised to become even stronger.
For markets: Cheer up, boss
JPMorgan’s CEO gave an equally pessimistic global outlook this week, but it was his prediction that the S&P 500 could fall another 20% that really rattled investors. But chin up guys, we’ve dealt with worse: while that drop would leave the index flagging 39% below its January high, the fall would still pale in comparison to times of the dot-com crash and the financial crisis. | 
