This Bear Might Be A Bull

Resurgent emerging markets, cheap oil, and an end to the trade war could boost 2019.

- Simon Kennedy & Enda Curran

Watch out: The bears have come out of hibernation and are crashing all the holiday parties.

Just 12 months ago, the global economy looked to be in robust health. The International Monetary Fund hailed the synchronized upturn, with even traditional laggards such as the euro area and Japan looking sprightly.

Fast-forward to the eve of 2019, and warning signs are flashing in financial markets that a worldwide slowdown is around the corner. The S&P 500 is on course for its second- worst December on record, while the price of a barrel of oil has plunged to about $50. Morgan Stanley is warning of an “earnings recession.”

There’s plenty to justify the gloomy shift. A long but patchy period of expansion is showing signs of fatigue, while central banks are turning off the easy-money spigot. And despite a temporary cease-fire, the U.S.-China trade war is damping growth in global commerce and probably investment as well.

Purchasing managers at manufacturers worldwide are nervous about the outlook for orders. A gauge of their sentiment produced by JPMorgan Chase & Co. and IHS Markit Ltd. stands at 52, the lowest level since September 2016.

While President Trump and Chinese President Xi Jinping declared a 90-day ceasefire in their tit-for-tat tariff assaults after their recent meeting in Buenos Aires, most duties haven’t been rolled back. The two sides remain far apart on issues like intellectual-property protections and China’s ambitions to achieve dominance in leading-edge industries such as artificial intelligence and electric cars.