As the markets rally off of the ugly end to 2018, some of the most influential names in global business are exchanging ideas and sharing their concerns at the World Economic Forum in Davos, Switzerland.
Despite the S&P 500 jumping 13 percent off the recent lows, some of these titans are beginning to see more and more cracks develop in the global economy, and those concerns — though not yet overwhelming — are starting to weigh a little more heavily on their minds.
Five experts weigh in on where the global economy stands:
- Blackstone CEO Steve Schwarzman acknowledges the headwinds but thinks that, overall, the U.S. should be alright for now. “I see the U.S. sort of rolling along, but at a lower rate for growth,” he said. “Consumer confidence is down a little bit, which I think comes from some of the dysfunction, but they’re still spending a lot of money, and we’re a 70 percent consumer economy.” Instead of a growth-stalling slowdown, Schwarzman thinks that previous high-level growth periods were simply unsustainable and what we’re headed toward is a more realistic path. “We’ll probably grow this year, probably 2½ percent, maybe 2¾. I don’t see any recession, I don’t know where that came from the last couple months of the year.”
- Bridgewater Associates founder Ray Dalio’s outlook is a little more grim. “There’s a high likelihood of a significant slowing in 2020,” he said. “We’re in the later stages of the cycle. We have had certain things that mean there is a hump in growth and then there is going to be, globally, a slow-up. It’s not just the United States. It’s Europe, and it’s China, and Japan.
- J.P. Morgan CEO Jamie Dimon compares the U.S. economy to a ship, and global headwinds to an iceberg. “It’s going, going, next to the shutdown, you get 2½ percent, and that’s going to keep on going for a while,” Dimon said. “Then you have all this other noise — geopolitical noise, Brexit noise, [Fed] noise, shutdown, trade. … So eventually, that may very well cause a slowdown or a recession. I don’t know if it’s 2020, 2021, but the range of possibilities is broader, and the range of bad outcomes is increasing.”
- David Solomon’s outlook is a bit more rosy. “I think the underlying economy is OK, our economists are saying 3½ percent global growth for the year, a little more than 2½ percent for the U.S.” the Goldman Sachs CEO said. “The issue is when you think about the government shutdown, you think about the 90-day deadline on trade, you think about the negotiations of Brexit, you look at some of the bigger macro issues that are out there. Any one of these individually probably doesn’t slow us down, but a combination of things not going the right way will have an impact on markets and will have an impact on sentiment.” In other words, it would take something like a perfect storm to derail global growth.
- “A lot of people are looking at volatility,” said Pimco Vice Chairman John Studzinski, “and there’s been more and more movement into cash and cash equivalents.” While Studzinski says it’s hard to know when the next recession will come and how hard it will hit global markets, caution is undoubtedly increasing among investors. “I think the market is also telling people that, when they look around the world, they have made a lot of money in the last 10 years, and yet the next recession, when it comes, … I think we all know that … it’s more likely to come in 2021 or 2019.”