In light of the uncertainty caused by the US-China trade war, the IMF expects the US economic growth to slow from a three-year high of 2.9 per cent in 2018 to 2.5 per cent in 2019, while China’s expansion has already slowed in recent years, albeit from much higher levels.

Trump stimulus dissipates

US President Trump and the previous GOP-controlled US Congress claimed to be breathing new life into the US economy with generous tax cuts. The US economy is now overheating, with inflation rising above target, causing the Federal Reserve to continue raising the federal funds rate to dampen demand.

As most families hardly gained from the tax changes, US purchases of houses and consumer durables continued to decline through 2018. Instead of investing in expanding productive capacity, US companies spent much of their tax savings on a $1.1 trillion stock buy-back spree in 2018.

Hence, the positive impacts of tax cuts were not only modest, but are also diminishing. Nearly half of 226 US chief financial officers recently surveyed believe that the US will go into recession by the end of 2019, with 82 per cent believing that it will have begun by the end of 2020. Wall Street’s biggest banks, JP Morgan and Bank of America, are also preparing for a slowdown in 2019.

As if to confirm their concerns, both the Dow Jones Industrial Average and the S&P 500 had their worst ever December performance since 1931, when stocks were battered after the Great Crash.