In case you missed it, the IMF cut its 2016 global growth outlook again today, to 3.2% versus 3.6% put forth in October (see the revisions in the chart below). The IMF's policy prescription? More central bank monetary accommodation.
But hang on a sec. How effective can additional stimulus actually be?
After 600 rate cuts globally, $8 trillion in negative yielding bonds & years of central bank easy money, global growth has continually surprised IMF economists to the downside. Furthermore, we continue to highlight that central bankers are increasingly pushing on a string as equity and currency markets in Europe and Japan move in direct opposition to the ECB and BOJ's easy-money intent.
Here's analysis on Japan from Hedgeye CEO Keith McCullough in a note sent to subscribers this morning:
"The yen finally stops going parabolic (down -0.3% vs USD) on these poor Japanese central planners who are now calling for an “end to one-sided speculative moves”, lol. Nikkei gets relief on that obviously, +1.1% and still -24% since #TheCycle peak in July."
Here's the long-looking chart of Japan's TOPIX (-16% year-to-date) and USDJPY (-9.6% ytd) inclusive of today's modest bounce:
Meanwhile, in Europe...
"No relief for the Euro’s ramp ($1.14 vs USD) for European Equity bulls who not only have to deal with the reality of an economic slow-down from #TheCycle (2015) peak, but crashing banks and equity indices; Italy leading lossers (again) this morning taking the MIB Index crash to -27% since July."
Here's the chart of the Euro Stoxx 600 (-9.2% year-to-date) and EURUSD (+4.7% ytd):
The final holdout in the fast evaporating central planning belief system is the Fed. As we head into 2Q16, the U.S. faces its toughest GDP comp of the cycle, not to mention the ongoing industrial and corporate profit recessions. Make no mistake Yellen & Co. can't arrest economic gravity forever.
