Apr 15, 2019

Investors remain bullish in the face of IMF fears

Illustration: Lazaro Gamio/Axios

In a seemingly coordinated effort, IMF managing director Christine Lagarde, deputy managing director David Lipton and chief economist Gita Gopinath all worried aloud about the "delicate" state of the world's economies at last week's spring meeting in Washington.

What's happening: The IMF cut its global growth forecast for the 3rd time in 6 months to its lowest estimate since the financial crisis, but fund managers and analysts who were in Washington for the event seemed to largely disregard the foreboding. They're bullish.

What they're saying: "The mood is a bit too sour," Ed Al-Hussainy, senior interest rate and currency analyst for Columbia Threadneedle Investments, told Axios on the sidelines of the meetings.

  • Investors and analysts like Al-Hussainy say that while growth is slowing, there are no signs of a global recession or a major shock that would send markets dramatically lower.
  • "If anything, it should be a relatively contained slowdown, a relatively sweet spot. Because financial conditions should not be too volatile, we will not have monetary policy like what pushed us into the taper tantrum in 2013,” Claire Husson-Citanna, an emerging markets debt portfolio manager for Abu Dhabi's sovereign wealth fund, said during an investor presentation.
  • Further, with the Fed pausing its interest rate hiking cycle, China adding stimulus measures and the European Central Bank restarting its TLTRO loan program, there's a feeling that we're in a "Goldilocks" investment environment, said Alejo Czerwonko, an investment strategist at UBS.

So why is everyone worried?

  • "I think part of that has to do with the fact that we’re about to set a record in terms of U.S. economic expansion, and those of us who have been in and out of markets over the years, we’re paid to be contrarians and paid to look at cycles and paid to worry about what’s around a corner," said Christopher Smart, head of macroeconomic and geopolitical research at Barings. "But I think if you do look at the current cycle, things still look pretty good."

The bottom line: Deutsche Bank recently updated its U.S. economic outlook, noting that it sees last month's U.S. Treasury yield curve inversion as a "false alarm." Deutsche Bank chief economist Torsten Slok said in a note to clients that the bank does not see a recession in the next 3 years.

  • In fact, he said, "This backdrop is bullish for equities."

Go deeper: Investors aren't punishing companies for bad guidance

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The race to catch Nike's Vaporfly shoe before the 2020 Olympics

Illustration: Aïda Amer/Axios

Four months ago, on the very same weekend, Eliud Kipchoge became the first human to run a marathon in under two hours, and fellow Kenyan Brigid Kosgei shattered the women's marathon record.

Why it matters: Kipchoge and Kosgei were both wearing Nike's controversial Vaporfly sneakers, which many believed would be banned because of the performance boost provided by a carbon-fiber plate in the midsole that acted as a spring and saved the runner energy.

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Reassessing the global impact of the coronavirus

Illustration: Aïda Amer/Axios

Economists are rethinking projections about the broader economic consequences of the coronavirus outbreak after a surge of diagnoses and deaths outside Asia and an announcement from a top CDC official that Americans should be prepared for the virus to spread here.

What's happening: The coronavirus quickly went from an also-ran concern to the most talked-about issue at the National Association for Business Economics policy conference in Washington, D.C.

Tech can't remember what to do in a down market

Illustration: Rebecca Zisser/Axios

Wall Street's two-day-old coronavirus crash is a wakeup alarm for Silicon Valley.

The big picture: Tech has been booming for so long the industry barely remembers what a down market feels like — and most companies are ill-prepared for one.