The 2020s aren’t going to enjoy the same economic boom as the Roaring ‘20s—at least if you ask the World Bank.
The financial institution cut its global economic growth projection for 2025 from 2.7% at the beginning of the year to 2.3% today. That wasn’t all: The World Bank noted that the 2020s are on track for the worst economic growth since the 1960s. Zooming in, the World Bank cut its expectation for US growth this year by a full percentage point down to 1.4%.
If today isn’t your first day reading this newsletter, you’re probably already familiar with the reasons why financial institutions are slashing forecasts left and right: The ongoing trade war has spooked investors, and all the uncertainty is causing the pillars holding up the economy to wobble.
“International discord—about trade, in particular—has upended many of the policy certainties that helped shrink extreme poverty and expand prosperity after the end of World War II,” wrote Senior Vice President and Chief Economist Indermit Gill in the report. “But this moment offers a chance to reset the agenda—with renewed global cooperation, restored fiscal responsibility, and a relentless focus on creating jobs,” he added.
The end of an era?
Sure, the World Bank is just one hater. But it’s far from the only economic powerhouse forecasting clouds on the horizon.
Just last month, the International Monetary Fund lowered its forecast for US economic growth in 2025 by 0.9% to a measly 1.8%. Its global projection wasn’t any better: The IMF slashed its global growth outlook for 2025 down to 2.8%—the slowest rate of growth since 2020.
In addition, the World Trade Organization said last month it expects a 0.2% drop in global trade this year.
The big picture: We get it, those are a lot of scary numbers. But it's by no means doomsday, and fear shouldn’t stop you from building a diversified portfolio.
“The potential for market swings continues,” explained UBS Chief Investment Officer Ulrike Hoffmann-Burchardi in a note yesterday. “But in our view, this should not impede investors putting cash to work, especially given our continued expectation for US equity gains over 12 months and that both interest rates and cash returns are set to fall as the year progresses.”—LB
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