Synchronized global growth
Towards the end of 2017, the term “synchronized global growth” appeared. Back then, things were looking strong for the global economy. The US economy was expected to expand at a fast pace in 2018 after the tax cuts. China’s economic growth also looked strong. Other developed and developing economies were also growing at a good pace. There didn’t seem to be imminent risks for the global economy. Copper, an indicator of global economic activity, rallied almost 8% in December 2017 and ended the year with 31.3% gains. Copper miners like Freeport-McMoRan (FCX) also rose sharply and followed copper higher. US equity markets (SPY) also rallied last year.
If copper indicates global macros, things aren’t looking great. Copper has lost almost 20% year-to-date based on the closing prices on September 14. Other factors like the stronger US dollar and supply resilience have played spoilsport with copper. However, trade war fears have been the key fear for base metal investors.
Earlier this year, the IMF raised its 2018 global economic growth forecast to 3.9% from 3.8%. The IMF said that the growth was “the broadest synchronized global growth upsurge since 2010.” Six months later, while maintaining its economic growth forecast, the IMF noted that “the expansion is becoming less even, and risks to the outlook are mounting. The rate of expansion appears to have peaked in some major economies and growth has become less synchronized.” The IMF listed “escalating trade tensions” as one of the risks for emerging markets.