Investment strategy
October 21, 2021
2 mins

Growing pains of a post-COVID global economy

October 21, 2021
2 mins
Steven Wieting
Chief Investment Strategist & Chief Economist
SUMMARY

The period of COVID disruptions and stimulus will give way to a “new normal,” with global GDP gains ongoing but decelerating. But overall, we expect growth to endure and supply shortages to diminish as consumer goods spending falls.


  • Global growth will likely exceed 5.5% in 2021 and fall below 4.0% in 2022. This is despite a broadening services expansion and a strong near-term outlook for goods production and trade driven by inventory rebuilding.
  • Monetary policy normalization points to a further growth slowdown in 2023, although no new recession is likely. China’s deliberate “multi-policy” tightening should yield its slowest growth rate in modern history aside from the initial COVID shock. After inducing a severe property slump, policymakers seem unlikely to reverse new regulatory restraints on housing. However, some temporary elements of the Chinese slowdown – such as energy supply constraints – should see relief. Broader policy easing is likely to improve China’s growth outlook for the second half of 2022 and beyond.
  • China’s slowdown to sub-4% growth near-term should spill over to other world regions. We have reduced our global equity weighting from 8% to 6% overweight, with cuts to Asia, Europe and some scaling back in the US, even as we see the US as the relative beneficiary of global capital inflows.
  • With energy costs now accounting for the largest share of the inflation spike, we see US CPI gains moderating to 3.0% in 2022 after a 4.5% rise in 2021, using yearly average data.
  • Our Global Investment Committee (GIC) has reduced its overweight to Global Equities from +8% to +6% and raised the Fixed Income and cash allocation from -8% to -6%. While we expect global equity returns in the high single-digits in our base case view over the year ahead, returns are moderating and certain global risks have increased.

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