Global growth and market prospects may improve in 2016
Subject Correlation between oil prices, equity markets and global growth. Significance Weak global growth and volatile equity markets in early 2016 illustrate how the real economy and distressed investors are struggling with rapid changes in such key parameters as the new energy and commodity price regime. This is because the 'losers' have to react quickly, plunging economies into recession before the 'gainers' generate any positive effects. These asymmetries, along with disappointing data, are spooking stock markets into a broad-based sell-off. After a nearly 10% fall in global equities between end-December and mid-February wiped as much as 6-7 trillion dollars off wealth, markets have rallied, especially in the United States, where key indices have recouped losses to trade at levels last seen at end-2015. Impacts A recovery in global growth prospects could emerge by mid-2016, stabilising commodity prices and underpinning gains in equity markets. Distressed sales of assets should abate and have less influence on markets. Easing fears over China will help markets rebound after the panic attack in early 2016. The consumer benefits of low energy and food costs have disappointed, but there could be higher spending throughout 2016.