Just as the global economy seemed to rebound from the stagnant years of the pandemic, the geopolitical crisis of Ukraine War has sent international markets roiling and investor morale spiraling.
According to a new survey by the Germany-based Sentix economic indicator, investor confidence in the eurozone is at the lowest it’s been since the early days of the pandemic in July 2020.
Worse still, it finds that a worldwide recession is just around the corner, and Europe will be hit first and hardest. But there’s an even worse finding tucked into the survey.
While the economic outlook in Asia and US is higher than the global average, morale is falling in regions and economic performance forecasts in every part of the world are all trending negative.
Morale dropped most precipitously in Europe, where investors have grown skittish about the ongoing war—which shows few signs of abating any time soon—and the consequences of Western sanctions cutting Russia out of the global economy.
Europe is bearing the brunt of the confidence collapse, but other parts of the world are all following the same pattern.
To recap, Sentix indicator surveyed over 1,200 investors in the first few days of April on their outlook toward specific regions and countries.
Investors surveyed by Sentix said that the war, sanctions, and their effects on slowing down the global logistics industry are sparking fears of an international economic shrinkage. Analysts at Sentix say that an economic recession could begin hitting parts of Europe as early as this month.
“Internationally, the declines are smaller, but the trend is the same everywhere,” it stressed.
Uncertainty as a result of the war will combine with global inflation to create a new type of economic crisis that is largely without precedent. In times of market uncertainty, an option for central banks for expansionary monetary policy and create more demand. But due to pandemic-infused inflation, a more expansive monetary policy is simply not an option. The Fed has already begun hiking interest rates in an effort to reduce aggregate demand and bring prices down. As the survey said, “For many investors, this is a new experience with its own risks”.
