HOMEPAGE NEWS MEDIA CENTER
04 Dec 19

The ongoing trade disputes between the US and China will not push the global economy into a downturn, according to BlackRock.

Addressing London Stock Exchange Group’s ELITE Day conference, Rupert Harrison, managing director in BlackRock’s multi-asset strategies team, said markets had been taken by surprise by a “deep and steep decline in global manufacturing and global trade” over the past 18 months.

However, this was likely to bottom out in the coming months, he said, as markets adjusted to China’s change of policy regarding economic growth.

There had been a “very big change of risk attitudes and policy”, Harrison said.

“Chinese policymakers have, since the financial crisis in 2008, repeatedly ridden the rescue of the global economy by being the consumers of last resort,” he said. “We have seen these repeated waves of stimulus through housing, infrastructure and credit.”

More recently, however, China had been attempting to manage the deceleration of its economic growth. “That, I think, is quite a big shock to the global economy, as it has taken away this consumer of last resort,” Harrison explained.

However, he maintained that BlackRock’s multi-asset team was “moderately optimistic”.

“There has been an incredible response from policymakers in the rest of the world, particularly central banks,” he said. “There has been a huge easing of financial conditions that will feed through into economic activity.”

In addition, there were signs of a truce between the US and China – at least in the short term.

“Just in the last few weeks, a big rotation has been happening in markets away from safe assets towards cyclical assets,” Harrison said.

“We do not think that the underlying tensions [between the US and China] around technology and strategic competition are going to go away,” he added. “They are going to be with us for a very long time. But in the short term, conditions do seem to be in place for at least the bottoming of activity.”

At an earlier session, Luigi Buttiglione, CEO and Founder of LB-Macro, a macro financial company, took the opposite view and argued that, as China was no longer the driver of the global economic cycle, it could signal a recession in some areas.

“China is now not as willing to leverage up as it was,” he said. Developed Markets major central banks will likely ease, but they are unlikely to be able to provide a full offset, he added.. Central banks might be willing to ease in a bid to offset this effect, but there was little scope for them to do so, he added.

Financial Times columnist Martin Wolf, who joined the discussion with Buttiglione, warned that Europe’s economic growth was likely to resemble that of Japan’s throughout the 1990s and 2000s.

However, he added: “There is nothing like bad times for good businesses to start. The assets are cheap, the people are cheap, and if you are ready when the upswing happens, great.”