Supportive monetary policy, fiscal stimulus and abundant investments in technology are the three keys to global growth, says Eric Morin, global head of research at CIBC Asset Management.
“When we take into account the tailwinds, we have a global growth outlook that has narrow potential,” he said in a Jan. 28 interview.
Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Asset Management.
Last year’s rate cuts by central banks will support global growth in 2026, as monetary policy tends to act with a lag, he said.
“The level of policy rate is, in general, stimulative or neutral in growth,” he explained. “So, this is another factor reinforcing the argument that monetary policy is a growth tailwind.”
Fiscal policy is also supportive of growth, particularly through elevated military spending amid a shifting global order, Morin said. Countries including the U.S., Canada, Germany, Japan and China, are seeing strong, inelastic demand for military investment, which is a growth driver that hasn’t been seen for decades. This is coupled with pro-growth fiscal policy in the same countries.
The global tech cycle also continues to be a key growth driver, he said, but what’s different today is that it is led by investment. This includes investments in AI, global data centres, and natural resources required to support tech equipment and buildings. Emerging markets like Korea and Taiwan, for instance, are producing memory chips.
And as AI continues to magnify the global tech cycle, military spending is increasingly being directed towards it, Morin said, creating an overlap between the two themes.
“So yes, we have tariffs in the U.S.,” he said. “Yes, we have immigration policies that are a growth impediment in the U.S. But when we take into account the tailwinds, we have a global growth outlook that has narrow potential.”
Risk assets tend to be positive against this type of global backdrop, Morin said. Meanwhile, the U.S. dollar tends to depreciate.
“The biggest reason why we have a conviction that the U.S. dollar should depreciate is the fact that growth outside the U.S. is improving, while in the U.S., growth is normalizing,” he said. “So that growth differential story should be a headwind for the U.S. dollar, and that should provide impetus to cyclical currencies.”
Another factor is the U.S.’s large current account deficit with the rest of the world, he said. And that deficit is growing due to the widening trade gap.
“If we were to see less appetite for U.S. assets, that would result automatically in a weaker U.S. dollar,” Morin said. “If, let’s say, the U.S. were to become less exceptional in terms of its attractiveness for bonds or U.S. Treasuries, that shift in foreign demand would trigger depreciation automatically, given the large deficit that the U.S. has.”
Meanwhile, fiscal deficits in the U.S. are elevated, he said. Many long-term institutional investors in emerging markets are reducing their exposure to U.S. Treasuries. “That fiscal story is indirectly contributing to U.S. dollar weakness via the foreign demand channel.”
Another headwind to the U.S. dollar is that it’s currently overvalued, and could remain so for up to a decade, Morin said.
He pointed out that the world is becoming more multipolar and less U.S. centric amid increasing U.S. political woes. This is reducing foreign demand for U.S. Treasuries.
“That political and geopolitical bucket is something that should reduce the attractiveness of the U.S. dollar as a global reserve currency,” he said.
Still, Morin said the U.S. should remain the provider of the world’s reserve currency due to the breadth and depth of its capital markets.
Meanwhile, the ratio of gold in central banks’ reserve has room to move up driven by inelastic demand, he said.
“We do love exposure to equity markets that are exposed to the gold story,” he said. “Canada is a gold producer, and what we saw this year is that the strain on Canadian stocks has coincided with upside pressure on gold prices. So if we believe that gold prices should continue to go up, that should provide further tailwind to Canadian stocks.”
This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.
