Equities: Growth downgrades and rotation theme – BNY

BNY’s Geoff Yu notes the International Monetary Fund (IMF) has trimmed its 2026 global growth forecast to 3.0%, with uneven impacts across energy exporters, tech economies and low-income importers, influencing global equities. The disinflation trend appears stalled as headline inflation is projected to re-accelerate before easing. Yu sees markets wrestling with stretched valuations, fading momentum and a shift from acceleration to consolidation.

IMF downgrades and stagflation concerns

"The International Monetary Fund has inched its 2026 global growth forecast down again to a sluggish 3.0%. Growth is projected to rebound to 3.4% in 2027, but that is still below ‌the average of 3.5% seen in 2024 and 2025."

"Global headline inflation is seen rising from 4.1% in 2025 to 4.7% in 2026 before easing to 3.9% in 2027, suggesting the disinflation trend has stalled."

"Stagflation risks remain in prospect. The IMF has downgraded its global growth forecasts, while both the BoJ and New York Fed have warned that higher energy prices and tariffs will continue to feed through to inflation."

"We concur with the view that geopolitical tail risks are well-covered, but that alone is unlikely to support a market that is grappling with stretched valuations and fading momentum ahead of earnings season."

"Risks remain tilted to the downside, with renewed conflict, trade fragmentation and a technology correction the key threats."