The S&P 500 and equity ETFs have been stuck in a range since the end of February as investors weigh improving earnings against fresh fears over the Eurozone debt crisis.

The International Monetary Fund issued an optimistic outlook on the overall global economy, but global markets and exchange traded funds may have a hard time fulfilling the projections, considering the new developments in the Eurozone.

In mid-April, the IMF raised its global growth forecast for the first time in over a year, estimating that the world economy will expand 3.5% in 2012, compared to the January calculations of 3.3%, reported Ian Katz for Bloomberg. Additionally, the world will grow 4.1% in 2013, up from 4.0%.

  • iShares MSCI ACWI Index Fund ETF (NYSEArca: ACWI)
  • Vanguard Total World Stock ETF (NYSEArca: VT)

The forecasts were largely dependent on the premise that the euro area has stabilized since the default fears of last year, with the Eurozone contracting by 0.3% in 2012, instead of the previously estimated 0.5%.

  • iShares S&P Europe 350 Index Fund ETF (NYSEArca: IEV)

Additionally, China is expected to expand 8.2% and Japan to grow 2% this year.

  • iShares FTSE/Xinhua China 25 Index Fund ETF (NYSEArca: FXI)
  • iShares MSCI Japan Index Fund ETF (NYSEArca: EWJ)

The U.S. is expected to gain 2.1% in 2012 and 2.4% in 2013.

  • SPDR S&P 500 ETF (NYSEArca: SPY)

“Improved activity in the United States during the second half of 2011 and better policies in the euro area in response to its deepening economic crisis have reduced the threat of a sharp global slowdown,” the IMF has said. “Weak recovery will likely resume in the major advanced economies, and activity is expected to remain relatively solid in most emerging and developing economies.”

“The most immediate concern is still that further escalation of the euro-area crisis will trigger a much more generalized flight from risk,” the IMF added.

However, recent developments may change the outlook, which Spain has highlighted, StarTribune reports.  Now, the IMF points to three potential scenarios: Eurozone credit may fall 1.7% by the end of 2013, creating a hallow recession and return to growth in 2013. If the Eurozone rescue fund and guidance is better-than-expected, credit would only shrink 0.6% and the area would return to growth this year. If fiscal agreements deteriorate, credit would drop to 4% or more, causing a deep recession.

The IMF now projects that growth in the U.S., Japan and emerging Asia could drop off by more than 1% in 2012 and 2013 if the worst case scenario comes to pass. [Political and Growth Uncertainty Weigh on Stock ETFs]

  • SPDR S&P Emerging Asia Pacific ETF (NYSEArca: GMF)

For more information on global markets, visit our global ETFs category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own SPY.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.