We think that recent fears about a global slowdown, and hence the reaction in financial markets, have been overdone. In fact, we expect global growth to accelerate this year and the prices of most commodities to recover, partly as a consequence of better news from China. Accordingly, we think that equity prices will find a floor soon and expect the FTSE 100 to end this year at 6,500. Similarly, financial markets have gone way too far in pushing back expectations of the first rate hike to mid- 2019. So there is scope for government bond yields to recover too. However, sterling is likely to come under more downward pressure ahead of the EU referendum. Even if the UK votes to stay in the UK, worries about the UK’s current account deficit could prevent a sharp rebound in the pound.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services