E The Global Outlook Is Looking Slightly Less Gloomy

In addition, on the economic policy side the key central banks - the US Federal Reserve, the European Central Bank, and the Bank of Japan -- have sharply eased on their monetary policies. Of course, widespread monetary easing has also boosted equity markets and market expectations.

Roubini’s fourth source of global risk reduction was the realization by the Trump Administration that oil prices would sharply escalate if the US responded aggressively to Iran’s provocations in the Middle East. The fact that Trump backed off is, of course, positive as well. 

Obviously, the global economy still suffers from many potential risks which have not really gone away. 

A successful China-US phase one deal cannot be fully counted on. Neither of course, can we assume that a soft Brexit solution will be realized. Moreover, the statistical odds associated with strong equity markets continuing on also cannot be counted on. Market participants who have any sense of history must worry that the US about to add another year to its longest economic expansion on record. 

Nonetheless, if a soft landing does occur, among the advanced economies one should have the greatest confidence in the US economy. As long as the American economy is responsive to easy financial conditions, improved US growth would tend to spill over to all of the advanced economies. 

The international soft-landing scenario also partly depends on the Brexit drag on the UK economy easing back a bit. As well there should be a economic gradual growth pickup in Europe in 2020 while Japan’s economy simply plods along very slowly. There is still the negative impact from Japan’s October consumption tax hike to work through on its economy.

China’s economy will continue to grow a bit slower in coming years, but on the positive side, we should recall that China’s economic policy levers work very positively and quickly on the domestic economy. 

The following soft-landing global projections are taken from a recent Goldman Sachs report.

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