The Macro Report | January 2019

A delicate balance

Forecasting 2019 means interpreting the interactions between economic growth, interest rates, and risky assets. Global growth is slowing. In the United States, waning fiscal stimulus measures and higher rates will trigger the pace of expansion to moderate this year. While we do not forecast a recession, markets remain on edge and investors are betting a slowdown will prevent the Federal Reserve from raising interest rates. A growing chorus of Fed officials have in recent weeks indicated the central bank will need to assess the economy before considering additional monetary tightening.

Meanwhile, China’s economy — the world’s second largest and an anchor for other emerging markets — continues to face headwinds. The central bank has taken steps to cushion the slowdown. President Donald Trump and Chinese President Xi Jinping agreed to hold off on further tariffs until March 1, 2019, to allow time to negotiate a trade agreement. Elsewhere, emerging markets remain vulnerable to rising interest rates and cooling growth.

Global growth set to slip

Global growth set to slip

A Goldilocks scenario for 2019 would require economic growth that boosts risky assets but is not so strong that it pushes up interest rates.

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The Fed: All bets are off

The Fed: All bets are off

Financial markets stumbled up and down on worries the Fed was moving too quickly, but Powell’s recent wavering is raising the odds of a pause.

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Emerging markets stay afloat

Emerging markets stay afloat

While some emerging-market assets have started to rebound, their economies remain vulnerable to a slowdown in China and rising global interest rates.

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About the macro report

The Macro Report is written by members of Putnam’s Fixed Income team. With backgrounds in applied economics, currency and interest-rate analysis, and sovereign and local bond market dynamics, this group conducts macroeconomic research in support of Putnam’s global fixed-income strategies.

Michael Atkin, Portfolio Manager
Investing since 1988
Sovereign debt, global growth analysis

Albert Chan, CFA, Portfolio Manager
Interest-rate derivatives, government debt, risk analysis

Onsel Emre, PhD, Analyst
Inflation, risk analysis, global growth dynamics

Sterling Horne, Analyst
Politics and economics

Irina Solyanik, CFA, Analyst
Quantitive analysis, growth forecasting

Izzet Yildiz, PhD, Analyst
Labor market analysis, global growth dynamics