60% of investors fear a global growth slowdown
More than 10 years ago from today, the majority of the world experienced the effects of the financial crisis. What started as a crisis in the mortgage-backed securities market in the United States quickly spread to other financial institutions on Wall Street and other parts of the world.
After this financial crisis, however, there has been quick and steady growth across the globe, aside from the trade wars that have been going on between Donald Trump’s United States and Xi Jinping’s China. However, recently, there have been fears of a slowdown in the global economy once again due to a variety of reasons, from the trade war to worse performance in technology stocks than expected.
In a survey conducted by the Bank of America Merrill Lynch (BAML), it showed that 60% of investors surveyed think global growth will weaken over the next 12 months.
A net 48 percent of fund managers believe that company balance sheets are over-leveraged — the highest it has been since 2009.
Another concern, aside from the trade war and technology stocks, was the high amount of debt that companies took on in recent years, with a net 48 percent of fund managers believing company balance sheets are over-leveraged – the highest it has been since 2009.
Investors have become reluctant to put money into highly leveraged companies as rising interest rates impact refinancing costs.
This sentiment is reflected in the startup and investment sphere as well, as investors look for companies that have shown traction, or better yet are already drawing a profit.
For example, Singapore's food delivery platform, Grain, that has been bootstrapped since its foundation in 2014, recently received $10 million from investors to expand in the South East Asia region.
The U.S. dollar as a currency has been amongst the best performing assets globally, thanks in part to the fiscal stimulus and introduction of higher tariffs.
However, BAML strategists wrote in their report that the currency has been the most overvalued since 2002, a few years before the 2008 recession, indicating a warning for what could be a repeat of history.
Having said that, only 14 percent of investors are expecting a global recession within 2019, factoring in "secular stagnation."
While the US-China trade war has strongly affected markets, it could all turn around as soon as a deal is on the horizon. Trump is said to meet China in renewed efforts for breaking a deal. The pressure of elections could be a determining factor in the speed of these negotiations.
Besides, U.S. saw venture capitalists invest a whooping $130 billion in the startup and SME ecosystem in 2018, a 132% jump from 2017. As big tech companies like Uber, Lyft, Slack, and others have gone or are in the process of going public, the new generation of startups could show promise for growth given the increasing investment interest in private companies.