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2019 Outlook – Market Commentary
THE OUTLOOK FOR 2019 – Key factors impacting the market in 2019:
If you were to ask an astrologer what the year ahead will bring, they would tell you that 2019 is a year when the transit of Mercury – the planet of trade and commerce – will travel across the face of the sun causing unrest and uncertainty, an occurrence that won’t be sighted again until 2032.
They wouldn’t be far wrong in their predictions. The last time Mercury made this move was May 2016, since which, the world has endured fires, floods, Brexit, and all the things you thought you could entrust – thrown up in the air, all offering unparalleled and unimaginable change ahead.
According to the World Bank, the outlook for the global economy has ‘darkened’. IMF managing director Christine Lagarde speaking this week at the annual World Economic Forum in Davos, Switzerland, said that the IMF has modestly cut its global growth forecast for 2019 to 3.5% from 3.7%. She said the move was due to the high level of economic risks that are accelerating around the globe. Growth for 2020 is expected to come in at 3.6%, down 0.1 percentage points on the previous forecast. The fund pointed to weakness in Europe and Japan and it expects growth in advanced economies to slow to 2% in 2019 from 2.3% in 2018.
Outlook:
2019 is a year that will be tested by events on the world stage. As the UK and Europe battle out Brexit, with the fears of a no-deal in March that could lead to significant tariffs hikes or new deals needing to be formalised, the US has its own set of decisions to make over China, its largest trading partner. Anticipation over the two mega-countries relations and impact on global trade flows is ever present, with no signs of going away in a hurry. China announced this month that its official economic growth came in at 6.6% in 2018 – the slowest pace since 1990. Fourth quarter GDP growth was 6.4%, matching expectations, a decline from 6.5% growth in the third quarter of 2018. Despite this, China still ranks first among the world’s five largest economies and contributed about 30% to global economic growth, making it the largest contributor of global economic growth, according to World Bank stats.
Notwithstanding aforementioned geopolitical challenges, is Russia’s tenuous relationship with the US. According to US government trade stats, the US goods trade deficit with Russia was $10.0Bn in 2017, a 14.5% increase (or $1.3Bn) over 2016. Unrest in the Middle East continues, impacting trade flows in and out of key countries and uncertainty over resolutions in corners of South America, such as Venezuela – with limited international intervention – tells us aspects of trade flows is likely to remain impacted.
Supply – For the first time in a number of years fleet growth in the chemical tanker sector is expected to slow down, with the current order book being just 6% of the current fleet (by DWT) and with anticipated scrapping will create more of an upside in freight rates as the fleet shrinks. The orderbook for vessels between 17,000DWT – 42,000 DWT is between 5.9 – 7.3% for 2019 and 2.7% – 4.2% for 2020… [Continued on pg 12 of our January 2019 Monthly Report, SPI Marine].
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