Special Report: Global Recession – A Realistic Scenario

BMI Research has just published a special report examining the risk of a global recession in 2016. While a global recession is not our core scenario, the conditions for a recession are arguably in place, and downside triggers are not difficult to identify.

In this report, we look at various troubled spots of the global economy which could be particularly vulnerable in the event of a global recession, or could themselves trigger a global economic downturn. In particular, a deterioration in China's economy is a very real possibility. Consequently, we examine five scenarios for Chinese growth over the coming five years. We also highlight the implications of a Chinese hard landing for commodity exporters across the world.

A downturn in the United States is another potential trigger examined in this report. A US economic contraction – even a modest one – would not just knock out a major pillar of global growth but would shatter confidence. Ongoing weakness in the manufacturing sector and growing credit market stress are warning signs for the US.

Furthermore, the report outlines our financial markets view amid global recession concerns. We believe that US equities are most at risk given their still-extreme valuations, while emerging markets should outperform. One exception is China, which we expect to underperform as intensified economic weakness drags down the yuan and the local equity market.