Significant uncertainties about the reactions of central banks could lead to pressure on valuations.
The latest announcements from the IMF point to a scenario of still sustained growth but subject to various risks. Therefore, we will have to favor a cautious portfolio allocation, with interest rates continuing to rise and volatility which should persist on the equity markets over the coming weeks.
Still vigorous recovery
The IMF has just updated its biannual economic forecasts and confirms the strength of the global economic recovery, at + 5.9% in 2021 and + 4.9% in 2022. The institution has only slightly revised its downward trend. forecast for 2021, acknowledging recent supply issues and sanitary difficulties still present in several countries. The forecasts therefore remain those of a vigorous recovery in the United States (+ 6% in 2021 and + 5.2% in 2022) and in the euro zone (+ 5.0% and + 4.3%), in particular supported by government policies (Biden plans in the United States and Next Generation European Union in Europe). As for emerging economies, the slight downward revision of the Chinese economy (+ 8% and + 5.6%) is more than offset by the momentum observed in commodity-exporting economies which are benefiting from the rebound in prices. .
A risk of more inflation
The forecast posted by the IMF is that inflation will rise sharply towards the end of the year, moderate in mid-2022, then fall back to pre-pandemic levels (forecast for developed economies + 2.8% in 2021 and 2.3% in 2022). But beyond these numerical forecasts, the report stresses that “the risks of inflation are biased upwards” and advised central banks not to fall behind in their actions if the pressures on prices show signs of abating. persistence. The IMF thus highlights the “difficult compromise” facing central banks, which want to continue to support the post-covid economic recovery by keeping interest rates low, but must watch that current price pressures do not turn into persistent inflation.
There is therefore a financial risk if central banks react too late. Financial conditions today remain very accommodating in the developed economies, supported in particular by the policies of the central banks, and continue to be a real support for the markets of various assets (financial and real estate in particular). Too late action by central banks in the face of the risk of inflation could necessitate a greater tightening of their policy and imply a risk of greater stress on the valuations of these assets.