Christine Lagarde: The Other Monetary Boss Lady Speaks Out

Markets for the most part took a breather from taking their daily beating today. They were led higher by opportunistic buying, short covering, hopeful players betting the slide is over and, when trading opened in New York, reliance on a robust private jobs-creation number by ADP. Oil and gold were the exceptions, heading lower.

However, the head of the IMF, Christine Lagarde sounded a number of notes of caution, not so much for the highly developed world but for emerging economies, especially those heavily involved in commodities or lower level manufacturing exports.

Provocatively, Lagarde cited the complexities of global political affairs, thinking no doubt of the Middle East, Ukraine and the refugee crisis besetting Europe. (She called the political moment “a difficult and complex juncture.”)

“On the economic front, there is also reason to be concerned. The prospect of rising interest rates in the United States and China's slowdown are contributing to uncertainty and higher market volatility,” she said. “There has been a sharp deceleration in the growth of global trade. And the rapid drop in commodity prices is posing problems for resource-based economies.”

One of the two most powerful women in the world – Janet Yellen of the Fed being the other – Lagarde seemed worried about the world’s economic condition.

“If we put all this together, we see global growth that is disappointing and uneven. In addition, medium-term growth prospects have become weaker,” Lagarde said. “The ‘new mediocre’ of which I warned exactly a year ago — the risk of low growth for a long time — looms closer.”

We wonder if this is the Japanization of the whole world?

Speaking of Yellen, Lagarde had warm praise for the Fed’s course, which may give us some insight into where the U.S. central bank may be heading later this year:

“We are very pleased to see the fact that the [Fed] decision will be data dependent. We think that that's very, very good. We don't see much movement on the inflation front nor on the wages front, so we are also very interested to see that the international scene is also perceived as likely to have domestic effects and may have been factored into the thinking.”

It should be noted that the World Trade Organization revised world trade projections down for 2015 by 0.5%. The WTO expects 2016 to be about at the levels predicted earlier this year, or 3.9% vs. 4.0%.

We too expect a long, hard slog for commodities, and that is not exclusive to third-world countries. U.S. ag commodities, gold and West Texas Intermediate crude are all price challenged right now.

That goes hand in hand with low or non-existent inflation. We’re not sure why – except for the ideological sway of technocrats and billionaires – there is even a one-minute discussion about raising rates soon.

Infrastructure, infrastructure, infrastructure… high-tech, low-tech, from superfast broadband system building to fixing bridges and roads, from mitigating the effects of rising sea levels along coasts to building more and better schools… there’s your answer to a revived world economy.

EXTRA READING: The world's 10 most competitive countries.

Wishing you as always, good trading,