What's going on?

There�s a new prophet of doom at work: the International Monetary Fund (IMF) cut its outlook for global economic growth in 2022 earlier this week.

What does this mean?

The IMF estimates that the global economy grew at its fastest pace in 40 years last year, but the organization�s not holding out much hope for this one. For starters, America�s nearly $2 trillion government spending bill is looking far less likely to pass than it was three months ago, which drove the IMF to cut its US outlook from 5.2% then to 4% now. And for another thing, China�s zero-tolerance Covid policies look set to cause even more lockdowns, which�pushed the IMF to slash the country�s outlook from 5.6% to 4.8%. Consider too that the organization underestimated how long sky-high inflation would stick around, and an about-turn was all but inevitable: the IMF downgraded its global economic growth forecast from 4.9% to 4.4%.

Why should I care?

For markets: Don�t cry for stocks.
The Federal Reserve (the Fed) is actively trying to address the inflation problem, confirming on Wednesday that it’s on track to raise interest rates soon. And it�s true, the move risks impacting the US stock market, which has already fallen nearly 10% this year. But while the Fed has stepped in to save falling markets in the past, this time looks different: a key valuation measure of America�s stock market is still 20% higher than the average over the last 10 years.

The bigger picture: You ain�t seen nothing yet.
The IMF might downgrade its outlook again if Goldman Sachs is to be believed: the investment bank said this week that it reckons the Fed�s rate hikes could play their own part in dragging on economic growth. Higher rates, after all, push up the cost of borrowing. And the more expensive it is to borrow, the less likely it is that people and businesses will be prepared to spend their hard-earned cash.