The IMF reduces its full-year global growth forecast

From Wayne Duggan: The International Monetary Fund is the latest major economic institution to temper global economic growth expectations for 2019. On Tuesday, the IMF reduced its full-year global growth forecast from 3.5 percent to 3.3 percent.

Economic Headwinds

In its new report, the IMF said ongoing trade tensions and the potential for tighter monetary policy are weighing on the global economy. Until trade deals between the U.S. and Canada, Mexico and China are completed and official, global economic risk is skewed to the downside, the organization said.

“Failure to resolve differences and a resulting increase in tariff barriers above and beyond what is incorporated into the forecast would lead to higher costs of imported intermediate and capital goods and higher final goods prices for consumers,” the IMF said.

Tuesday’s global growth cut is the second time the IMF has cut its 2019 global growth forecast.

The IMF also cut its 2019 U.S. economic growth forecast from 2.5 percent to 2.3 percent and its Eurozone growth target from 106 percent to 1.3 percent.

The latest round of 2019 growth adjustments from the IMF come after both the U.S. Federal Reserve and the European Central Bank cut their respective 2019 growth outlooks in March. The ECB cut its 2019 Eurozone growth forecast from 1.7 percent to 1.1 percent. The Fed lowered its economic growth forecast from 2.3 percent to 2.1 percent.

Silver Linings

Despite falling global growth expectations, there were some silver linings in the IMF report. Economists see the global slowdown stabilizing in the second half of 2019 before starting a recovery in 2020.

The IMF also raised its 2020 U.S. growth forecast slightly from 1.8 percent to 1.9 percent. Finally, the IMF raised its 2019 growth forecast for China from 6.2 percent to 6.3 percent but cut its 2020 China growth target from 6.2 percent to 6.1 percent.

U.S. markets didn’t initially react well to another round of economic growth cuts. The SPDR S&P 500 ETF Trust SPY 0.42% was down 0.4 percent on Tuesday morning, and the SPDR Dow Jones Industrial Average ETF DIA 0.59% was down 0.6 percent.

The Vanguard Total World Stock ETF (VT) was trading at $74.57 per share on Tuesday afternoon, down $0.33 (-0.44%). Year-to-date, VT has gained 0.78%, versus a 8.20% rise in the benchmark S&P 500 index during the same period.

VT currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 75 ETFs in the Global Equities ETFs category.

This article is brought to you courtesy of Benzinga.