Deutsche Bank sees world economy, investment reversing for the next 35 years

By: |
London | Published: September 10, 2016 12:25:23 AM

Global economic growth will be so slow over the next 35 years that policymakers will struggle to meet the significant economic, social and political challenges that results, Deutsche Bank said on Friday.

Global economic growth will be so slow over the next 35 years that policymakers will struggle to meet the significant economic, social and political challenges that results, Deutsche Bank said on Friday. (Reuters)Global economic growth will be so slow over the next 35 years that policymakers will struggle to meet the significant economic, social and political challenges that results, Deutsche Bank said on Friday. (Reuters)

Global economic growth will be so slow over the next 35 years that policymakers will struggle to meet the significant economic, social and political challenges that results, Deutsche Bank said on Friday.

And unlike the past 35 years, inflation and bond yields will rise over the next three decades, said the report, which was cited by bond traders on Friday as a reason for a selloff in fixed income markets that pushed bond yields up to levels not seen for months. Stock markets around the world also fell.

The detailed annual study from one of the world’s biggest banks argued that all the conditions underlying the previous 35 years of rising global growth and prosperity are fading.

“We’re about to see a reshaping of the world order that has dictated economics, politics, policy and asset prices from around 1980 to the present day,” Deutsche’s report said.

“Given that this current cycle has lasted around 35 years, it’s possible that the next cycle … will also last many decades. Extrapolation of the last 35 years could be the most dangerous mistake made by investors, politicians and central bankers,” it said.

It said asset valuations in major developed countries have never been higher, for reasons unique to the 1980-present day period.

The 10-year U.S. Treasury yield, effectively the global benchmark interest rate, leapt to 1.67 percent, its highest since Britain voted on June 23 to leave the European Union.

Germany’s 10-year yield rose sharply too, popping above zero for the first time since the Brexit vote. Wall Street slid more than 1 percent, also the biggest decline since June.

According to Deutsche, common themes over the next 35 years will include: lower real growth, higher inflation, less international trade, more controlled migration, lower corporate profits as a share of gross domestic product and negative real returns in bonds.

Do you know What is Repo Linked Lending Rate (RLLR), Wholesale Price Index (WPI), Public Debt, Finance Commission Grants & Other Transfers, Economic Survey? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.