Increased concerns for the global economy - Wells Fargo

According to analysts from Wells Fargo, the Brexit referendum and the latest US GDP data put downward pressure on global economic activity.

Key Quotes:

“Heightened uncertainty is not good for economic activity and the Brexit decision has introduced a higher level of uncertainty in a world that already had a good measure of it. That is, the Brexit decision and the very weak Q2 GDP growth number from the U.S. economy are the two latest negative additions to a global economy in need of more certainty rather than less.”

“Although we do not expect the effects of these two latest events to be long lasting, they are going to put some downward pressure, albeit small, on global economic activity. This means that, today, it is very difficult to see any upside for the global economy given the current environment of uncertainty. Some of this uncertainty will decrease in the next couple of months as we expect U.S. economic growth to rebound in the third quarter of the year, but other uncertainty related to Brexit and perhaps the U.S. presidential election will keep markets wondering for a longer time than what we were expecting before.”

“Perhaps the good news is that we are expecting some measures on fiscal policy in the U.K. as a consequence of Brexit while there is also potential for higher government expenditures in the U.S. if we follow both parties’ positions today. Of course, it is very difficult to know if this is actually going to materialize but at least both parties are, today, talking about higher government expenditures compared to the recent past. “