about 2 years ago • 3 mins
There’s a new prophet of doom at work: the International Monetary Fund (IMF) cut its outlook for global economic growth in 2022 earlier this week.
What does this mean?
The IMF estimates that the global economy grew at its fastest pace in 40 years last year, but the organization’s not holding out much hope for this one. For starters, America’s nearly $2 trillion government spending bill is looking far less likely to pass than it was three months ago, which drove the IMF to cut its US outlook from 5.2% then to 4% now. And for another thing, China’s zero-tolerance Covid policies look set to cause even more lockdowns, which pushed the IMF to slash the country’s outlook from 5.6% to 4.8%. Consider too that the organization underestimated how long sky-high inflation would stick around, and an about-turn was all but inevitable: the IMF downgraded its global economic growth forecast from 4.9% to 4.4%.
Why should I care?
For markets: Don’t cry for stocks.
The Federal Reserve (the Fed) is actively trying to address the inflation problem, confirming on Wednesday that it's on track to raise interest rates soon. And it’s true, the move risks impacting the US stock market, which has already fallen nearly 10% this year. But while the Fed has stepped in to save falling markets in the past, this time looks different: a key valuation measure of America’s stock market is still 20% higher than the average over the last 10 years.
The bigger picture: You ain’t seen nothing yet.
The IMF might downgrade its outlook again if Goldman Sachs is to be believed: the investment bank said this week that it reckons the Fed’s rate hikes could play their own part in dragging on economic growth. Higher rates, after all, push up the cost of borrowing. And the more expensive it is to borrow, the less likely it is that people and businesses will be prepared to spend their hard-earned cash.
Keep reading for our next story...
Boeing reported worse-than-expected quarterly results on Wednesday, as the aircraft maker’s Dreamliner continues to become the stuff of nightmares.
What does this mean?
Boeing’s been developing its 787 Dreamliner – essentially just a really efficient jumbo jet – for years now, and it’s been having production issue after production issue. No changes there then: the company wasn’t able to deliver a single one to customers last quarter, and not even more deliveries of its 737 Max made up for the shortfall. That led Boeing to post a $4.3 billion loss last year – its third-straight annual loss.
Still, that’s a big improvement on Boeing’s $12 billion loss at the same time in 2020, and the company reckons things can only go up from here. It might be right: a group of airline execs said earlier this month they expect international travel to bounce back this spring, which should mean demand for Boeing’s aircraft finally takes off.
Why should I care?
Zooming out: Airbus is going big.
Boeing might be missing a business opportunity in the meantime: archrival Airbus announced earlier this week that it’ll be forming its own airline for cargo delivery – a segment that’s been in high demand during the pandemic. The new airline will use Airbus’s Beluga aircraft – usually reserved for moving large aircraft parts – to fly freight for oil and gas companies, as well as for the world’s militaries.
The bigger picture: Wizz expects big bizzness.
It’s not just Boeing that needs travel to pick up: budget airline Wizz Air – which reckons the Omicron variant will keep passenger demand down until around March – just reported a bigger loss last quarter than the same time in 2020. Thing is, a lot of that was down to all the new workers, new planes, and new European bases it splurged on. That should help the airline carry 50% more passengers than it did before the pandemic by the time things have picked up this summer.
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