Jan 15, 2019

Slower growth doesn't mean stocks have to fall

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Reproduced from FactSet and Alger; Note: Material slowing of GDP is defined as 50 bps or more of a negative change in the annual real GDP growth rate; Chart: Axios Visuals

Economists have been wearing out their keyboards over the past couple of months writing down expectations for U.S. and global economic growth.

Reality check: Alger chief investment officer Daniel Chung and director of strategy Brad Neuman point out that slower growth does not necessarily mean weak equity returns.

Chung and Neuman note:

  • "In the past 35 years, there have been 15 years when U.S. GDP growth materially slowed, with the vast majority generating positive U.S. stock returns."
  • "Returns were negative only when accompanied by a recession (1990, 2000/2001, 2008)"

Reading the graph: Of the 15 times in the last 35 years that year-over-year GDP growth has fallen by at least 50 basis points, or 0.5%, the S&P has still risen in 11 of the 15 years. The gains have been as high as 38% in 1995 and 32% in 2013.

Go deeper: Why you should stop worrying about a recession

Go deeper

The world's fast-growing mountain of debt

The world's total debt surged by some $9 trillion in the first three quarters of 2019, according to data from the Institute of International Finance, bringing the world's total debt load to $253 trillion, or 322% of its GDP — a record high.

Why it matters: In times of economic strength, economists exhort countries to pare back their debt burdens and pay it down to protect against future unrest and downturn.

Go deeperArrowJan 13, 2020

World Bank cuts growth forecast for fourth time in a row

Photo: Win McNamee/Getty Images

The World Bank cut its global growth forecast for the fourth straight time on Wednesday, reducing expectations by 0.2 percentage points each year for 2019, 2020 and 2021.

"Global economic growth is forecast to edge up to 2.5% in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist. ... U.S. growth is forecast to slow to 1.8% this year, reflecting the negative impact of earlier tariff increases and elevated uncertainty."
— World Bank statement on its Global Economic Prospects report
Go deeperArrowJan 9, 2020

Wall Street has its best year since 2013

Data: FactSet; Chart: Axios Visuals

Wall Street had its biggest annual gain in six years — with the S&P 500 rising 29% and the Nasdaq Composite rising 35% in 2019. The Dow lagged behind other indices, but saw its biggest yearly gain since 2017.

Why it matters: U.S. stocks rebounded from 2018's year-end meltdown to log impressive gains, despite uncertainty stemming from the trade war and a slowdown in economic growth.