Global Growth Forecasts and the Future of U.S. Stock Markets

Let's get to the big story.

Breakdown.

Well ahead of the market open here on Wall Street, we are looking at US stock futures higher, and this does come ahead of the expiration of the ceasefire deadline between US and Iran.

And at the IMF meetings in Washington, the mood was decidedly dour.

The IMF slashing 2026 global growth forecast to 3%, citing an energy shock potentially worse than 2022.

Meanwhile, markets are bracing for a volatile week on multiple fronts.

Critical peace talks in Pakistan as well as mega cap earnings reporting and of course all eyes are on that nominee Kevin Warsh heading to Capitol Hill.

Well joining me.

Morning here at the New York Stock Exchange is Chris Watling, CEO & Chief Market Strategist at Longview Economics.

Chris, good morning.

Thank you so much for joining me.

Thank you.

Thank you for having me.

Well, here we are on Wall Street.

We are looking at stock features set to extend gains, but we all know that the stock market is not the economy, and there's still a lot of uncertainty regarding geopolitics.

So how are you assessing where we stand?

I think it's very encouraging.

We've been pricing out tail risks, and that's essentially what the market rally is telling us.

I think the market structure has changed in the last 5 years post-COVID, so you tend to get sharper moves up and down, and that's kind of what we've seen in the last few weeks.

But no, I'm encouraged.

The macro's good, the earnings are good.

We're starting to price in a bit of a rate cut into the futures curve and as long as Kevin Walsh gets nominated, we'll get some more of those.

And you just mentioned war, so we have less than an hour until he takes the stand before the Senate Banking Committee, and we will all be paying attention to what transpires.

But when it comes to the global rate outlook, we know that energy prices have been skyrocketing and that has been affecting inflation and hence the rate outlook for the global central.

Banks, give us your take on the implications there.

Well, I think there's definitely a risk of a policy error.

I think central banks get too carried away with this idea of second round effects.

So we saw it post Ukraine.

That was different.

That was a different environment.

There was a ton of stimulus in the economy globally, and so you've got the second round effects from oil prices and energy price spikes this time.

I think the, you know, the bottom half of the income in the US and most of the rest of the world is not doing that well.

The top half of the US and the AI, the industrial sector looks great in the States, but there's softness in Canada, China, the UK, Germany, France, you know, this is a lot of GDP of the world economy, so.

So I, I, I hope that um they're going to price out a lot of those hikes and a lot of those curves.

If you look in Europe, you look in the UK, you look at they're all curves, all those curves have got hikes in them and and I think we need more cuts in the states as well.

So, so I, I, you know, I worry that there's a risk of a policy error from the oil price spike, which I think is a temporary shock.

We shouldn't worry too much about it.

I think it'll pass.

Well here in the US, as you mentioned, consumer spending is something that we're keeping our eyes on.

We got the release of US retail sales, but we saw that spike is on the heels of the rising energy prices and when we're talking about the rate differential with global central banks.

What do you think that means in terms of the currency markets?

Well, I mean I would be bearish on the dollar.

I think the US dollar is going to resume its down trend.

It's had a temporary spike during the war, a bit of whisk off and all that sort of stuff, but I think the main trend will be down as you get more rate cuts coming to the curb in the US and as you get probably a new Fed chair who is more inclined to cut rates because of the productivity.

Miracle.

So channeling is in a green span, as I say.

So, um, so yeah, I think we're in a different global environment from the last 15 years where it's been a dollar bull environment.

I think we're in a bit of a dollar bear environment structurally and cyclically, and that might last a few years, and I suspect that would, that would suit the administration of President Trump, but um.

But I think that's the kind of environment we're in.

So actually investing overseas is quite a good thing in that environment if you're getting the currency as a headwind or a tailwind, sorry.

Yeah, and it's really interesting because here we are at the beginning of the second quarter of 2026 and heading into this year we're looking at double digit percentage.

Gains 3 years in a row for the major US stock averages, and many people are talking about diversification overseas, whether we're looking at Europe or Asia or even emerging markets.

But given what we've seen this year, where are you focused on in terms of global markets?

In terms of global markets, the way to think about global markets is to think about their sector composition.

They all have biases.

If you want tech, you go to the States or you go to China, perhaps, you know, or you pick up a little bit of Korea, so we have a bit of Korea, we like tech, but we also like some of the cyclical stuff.

Of the bank stuff and the currency is important in this respect, so we've allocated to some of the European markets.

Bizarrely, Spain has been one of our picks for a couple of years.

I don't know how much focus it gets in the States, but it's been a remarkably good stock market over the last 2 years and I think it will continue to be.

So I think there's some tech picks, some cyclical picks in terms of countries outside of the US.

And within the US, you know, things like the Philly socks is a very interesting index, and we've seen the way it's broken out to the upside, really impressive.

So you're getting different trends emerging over the last 12 months because I think the shape of the global economy is changing and the Western industrial cycle is coming back, having been absent for 3 years, and I think that's a really important factor in terms of what sectors you want to buy.

And finally, Chris, before I let you go, just building on what you just said, you mentioned that since COVID, the global economy has changed, and you mentioned that yet once again.

So what does that mean moving forward?

The way the stock market trades has changed and the global economy has changed in the sense that we had to squeeze money for a few years and so the bottom half of the US, the bottom half of the UK struggled for a few years, but now you mention retail sales, I think there's a broadening of that recovery and we're moving beyond that.

Um, and then outside of the states, well, I mean, again, I think money's been too tight, and, and we're starting to get to the point where there's been a lot of rate cuts over the last 1218 months.

We need a few more.

We don't want hikes.

But again, that, that, that recovery can start to get a bit of momentum.

So I, I mean the irony is, uh, the wonderful IMF have downgraded after the event and uh Mark is.

Forward looking and the rule of thumb markets is when they've downgraded, generally things start improving.

I don't mean to disparage the IMF, but markets are wonderful forward looking beasts, and I think I'm very positive about the outlook for global equity markets.

Chris, great to have you here.

Thank you so much for joining me and thank you so much for sharing all of your insights as well as your perspective.

Thank you, thank you.