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Dow Jones Lifts Despite Grim IMF Economic Outlook for 2020

Dow Jones Lifts Despite Grim IMF Economic Outlook for 2020

Thomas Westwater, Analyst

DOW JONES INDEX RISES DESPITE IMF FORECAST FOR DEEPEST RECESSION SINCE THE GREAT DEPRESSION TALKING POINTS:

  • The IMF’s World Economic Outlook forecast for 2020 calls for the worst recession since 1930’s great depression
  • Dow Jones Index rises on upbeat start to earnings season
  • Economic expansion set to continue in 2021

The IMF released its world economic outlook this morning, forecasting the deepest global recession since the great depression of the 1930’s. The Great Lockdown, as the IMF terms it, looks to put a serious hit on global growth for the current year, expecting a 3 percent contraction, 6.3 percent lower than the prior forecast from the organization.

DOW JONES INDEX (1-MIN CHART)

Dow Jones price chart

Source: IG Charts

Despite the grim forecast from the IMF, equity markets in the US jumped higher this morning as earnings season kicks off to a strong start. Both JP Morgan and Johnson & Johnson rose on the open, however, JP Morgan reversed its gain in the first hour of trading and is now over 2 percent in the red as the first two hours of trading concludes.

IMF 2020 ECONOMIC OUTLOOK PROJECTIONS

IMF world economic outlook projections

Source: IMF World Economic Outlook Report

While earnings provided markets optimism this morning, the dire economic situation for the global economy seems far from over as the IMF report details. Should the forecast for a 3 percent contraction comes to pass, it will surpass the 2008 financial crisis. However, the IMF’s baseline scenario assumes the global pandemic subsiding in the second half of the year and economic activity returning to positive territory in 2021 with a 5.8 percent growth rate.

This return to economic growth in 2021 depends on expectations for major economic powerhouses like the United States to continue supplying fiscal stimulus measures to the economy, among others. The economic outlook report also notes that central bank stimulus supplied support to confidence and set the economy on a better path to recover in coming months.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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