Global economy: Expansion to continue in 2018 and 2019 - Wells Fargo

According to analysts from Wells Fargo, global economic expansion has been in train for eight years, and they look for it to continue in 2018 and 2019 but they warn that there are risks.

Key Quotes: 

“There has been a global expansion under way since 2010, and our base-case forecast looks for global GDP to grow near its long-run average rate of 3.5 percent per annum in the coming two years. But, there are risks that are associated with any forecast, and readers would be well advised to be mindful of some of the more prominent risks.”

“In our view, geopolitical events probably represent the biggest downside risk to the global economic outlook. Although there are numerous geopolitical risks that exist at the moment, it is difficult to assign a probability to their realization or to quantify their potential economic effects.”

“Overall financial leverage has risen in many economies over the past decade, but debt-servicing difficulties likely will not become onerous, at least in the near term, unless interest rates move significantly higher. In that regard, the Fed could conceivably tighten policy faster than many market participants expect, but other major central banks probably will not follow suit, at least not in 2018.”

“There is potential for a disorderly move in the U.S. government bond market as Treasury issuance ramps up, and elevated stock prices in some countries are noteworthy. In sum, we expect the global economic expansion to remain intact for the foreseeable future. But to paraphrase the unofficial slogan of the London subway system, decision makers should “mind the risks”