A world “out of sync” will extend the cycle. Growth and monetary policy dynamics remain highly un-synchronised in the developed and emerging world. This lowers the likelihood of overheating and is one reason we think the current global expansion could end up being one of the longest on record.
That’s from the latest Morgan Stanley Global Strategy Outlook, which is titled “Investing In An Out-Of-Sync World.”
Basically, what it means is that the big world economies are all going through different experiences, with different phases of the monetary policy cycle.
The most obvious divergence is between the US and Europe. The US is on the verge of putting Quantitative Easing in the rear-view mirror, while Mario Draghi and the ECB have just announced a new asset purchase program that could even expand. That different is massive.
Then there’s Japan, which is already well into its Abenomics experiment, but which is expected to step on the accelerator even more.
Bottom line: Because not everyone’s booming at the same time, the global expansion might go on for a while, without overheating.
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