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War Fears Spark Deepest Growth Downgrade in Four Years
14 Apr
Summary
- Investors' economic growth expectations hit four-year low.
- Inflation expectations are at a near five-year high.
- Investor sentiment is the most bearish since last June.
Global investors are experiencing the most significant reduction in economic growth expectations in four years, driven by the ongoing fallout from the Iran war. This sentiment shift coincides with inflation expectations reaching nearly a five-year peak, contributing to the most bearish market outlook observed since June of the prior year.
The conflict has directly influenced energy markets, causing spikes in oil and natural gas prices. This has amplified worries that elevated energy costs could stifle economic expansion and pressure central banks into raising interest rates to curb inflation. Markets have reacted volatility to de-escalation efforts, with stock markets rising as crude oil prices fell below $99 per barrel amid potential peace talks.
A Bank of America survey conducted April 2-9 among 170 participants revealed that global growth expectations dropped the most since March 2022. Despite this, seven out of ten participants still anticipate that a recession is unlikely, with a majority expecting a "soft landing" for the global economy. The survey indicated a divergence between investor macro expectations and US equity prices.
