Davos Diary: Jack Lew Urges Calm as Stocks Nosedive
U.S. Treasury Secretary Jack Lew offers an upbeat take on China and low oil prices.
DAVOS, Switzerland — The U.S. Treasury secretary has a message for jittery investors and traders the world over: take a deep breath.
That’s the message U.S. Treasury Secretary Jack Lew delivered in Davos Thursday. Speaking at a session about global financial priorities in 2016, Lew said the global stock market rout since the New Year isn’t necessarily indicative of tough times ahead for the economies of China and emerging markets.
“I know it’s been bumpy days in the market, but I try to look beyond the hour to hour, day to day, to what the big trends are,” Lew said. He added, “I’m not minimizing that it’s been choppy in the markets, but I think you do need to look at some of these underlying trends in a long-term way.”
Unfortunately, many of the long-term trends Lew references are heading down. Oil is at record-low prices, and China’s economy is slowing down, which is sucking hundreds of billions out of emerging markets.
Lew said the falling oil prices could offer an economic boost of sorts to many people around why world. “For anyone consuming oil, lower oil prices are tax cut,” he said.
On China, Lew said Beijing was in a difficult position as it transitions from an economy driven by exports to one driven by Chinese consumers. “That’s a tough and disruptive process,” he said.
Lew shared some of the pessimism about the direction of the global economy that’s dominated conversations at the World Economic Forum. He argued that not everyone is in as good as shape as the United States, where the World Bank expects the U.S. GDP to grow 2.8 percent in 2016, and the five percent unemployment rate is the lowest it’s been since 2007.
“I look around the world and there are a lot of headwinds. We’ve seen very slugging growth in demand for some years now, and that’s led to a not-strong-enough global economy,” Lew said. “And now that things are developing in parts of the global economy that are disruptive, people are reacting to it.”
Photo Credit: Michael Reynolds/EPA