Manulife IM Q3 Global macro outlook

The global economy is rebounding sharply after the worst economic shock of modern times. Just as the COVID-19 recession was unlike any recession we’ve experienced before, so too will be the recovery. Crucially, the recovery won’t be even: We believe the global manufacturing sector will rebound much more sharply than the global services sector and employment activity. The recovery will also be uneven across economies, as countries confront a different mix of headwinds and tailwinds in the next quarter and year ahead. What’s true for most economies, however, is that central banks and governments will continue to provide record amounts of stimulus. Central banks have effectively prevented the economic crisis from evolving into a global financial crisis. Government stimulus has helped to buffer the global employment shock by subsidizing households and businesses, helping them through the worst of the crisis. And yet, this recovery isn’t without risks. Specifically, we’re still waiting for an effective treatment for COVID-19 and the possibility of surges in infections continue to threaten the recovery process. Rising geopolitical tensions may also weigh on market sentiment and lead to a slowdown in economic activity. Lastly, the U.S. presidential election is just around the corner and can only garner more investor attention as we move closer to November. While the global outlook is slightly clearer than it was three months ago, we’re still facing an unprecedented level of economic market uncertainty. In times like this, we believe it makes sense to train our focus on the most likely chain of events, apply wide confidence bands on our outlooks, and remain data-dependent on what’s likely to be an uneven and bumpy recovery.