In global #GrowthSlowing news, the World Bank just released its most recent 2016 year-end growth forecasts. It should come as no surprise to our subscribers, but the results aren't good.
The World Bank cut its 2016 global growth forecast to 2.4% from 2.9% projected in January. A slew of other country specific outlooks were cut as well, including China, Brazil, Russia, South Africa, Japan, and U.S. (See the chart at the end of this post for more on the estimates.)
What happens when growth slows?
With Swiss and German bond yields setting new lows, it's no surprise the 10yr Treasury yield is tumbling too. Here's some analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier today:
"If reflation was real growth, the 10yr wouldn’t be setting itself up for all-time lows – but you already know that. Risk Range on UST 10yr is now 1.64-1.79% after barely trying to bounce yesterday from its jobs day bomb."
Meanwhile, in international markets...
All is not well.
Consider the World Bank's assessment in its "risks to the outlook" section:
"In a weak growth environment, the global economy is facing increasingly pronounced downside risks. These are associated with deteriorating conditions among key commodity exporters, disappointing activity in advanced economies, rising private sector debt in large emerging markets, and heightened policy and geopolitical uncertainties. Other major downside risks over the medium term include increased protectionism and slower catch-up of large emerging markets toward advanced economy income levels. The possibility of delayed benefits from lower energy prices remains an upside risk."
Which gets us to the massive rally in Russian equities...
Additional analysis from McCullough:
"Forget Chinese demand continuing to slow (see this morning’s Export numbers for details), the real alpha out there next to being long real world #GrowthSlowing and Bond Proxies is in anything that looks like a commodity, including countries – that’s not a new story; that’s simply reflating the deflation (RTSI up another +0.8% this morning and +5% m/m)."
Below is the breakdown of the World Bank's forecasts and the GDP revisions for your own perusal. It confirms what we've long known:
Click to enlarge