SocGen downgrades global growth forecasts, sees S&P 500 flat from current levels

Deteriorating financial conditions led economists at Societe Generale to downgrade their forecasts for global growth in 2016 and 2017.

In turn, that meant central banks around the world would be back in the spotlight this year, SocGen´s chief economist Michala Marcussen said in a research report sent to clients.

Marcussen noted how markets had now become preoccupied by the possible 'dark side' of low and negatve yields, leaving risks to the real economy tilted towards recession.

The broker recently upped its estimated probability of world-wide economic recession from 10% to 20%.

There might be a potential game-changer lurking on the sidelines, in the form of fiscal stimulus through government spending.

Nonetheless, first policymakers would need to be left staring into the proverbial abyss.

"Thankfully, that is not visible at the current juncture."

In a separate report, Socgen said it was "too late" to 'underweight' risk assets, given falling expectations for policy tightening from the Federal Reserve.

"We see ample opportunity to achieve positive returns in 2016 as slower growth and less policy tightening mean the cycle could go longer, in our view. As a consequence we stick to our balanced allocation," SocGen´s global asset allocation team said.

Its new target for the S&P 500 left it flat by year-end from current levels, alongside mid-single digit gains for Japan and South Korea and Europe up in the high single digits.

"In a less stressed yuan scenario, China equities should perform reasonably well too," they added.

Euro area bonds remained "attractive" in anticipation of further easing from the European Central Bank "and we like short-dated periphery on carry."

US Treasuries were worth holding onto, SocGen said.

As regarded the meeting of G20 finance ministers in Shanghai scheduled for the following weekend SocGen concurred with IMF head Christine Lagarde´s call for "more coordination" between policymakers.