This evening, I’m going to talk about the economic context, about the collapse in financial markets and finally we’ll what kind of investments makes sense.
There was the year 2015 with the aligned planets: cheap oil, weak euro and negative interest rates. This favorable alignment was to boost growth in Europe and France. But growth did not come. And now that the year 2016 barely begun, this precarious order is already threatened. Three black stars are arising, while the World Bank has already lowered its global growth forecast for 2016 to 2.9% (against a 3.3% forecast in June).
The first threat comes from China, which had to close the Shanghai Stock Exchange, on Thursday, January 7, for the second time since the beginning of the year after a sharp drop. The second World economy is broken down, and Beijing is about to embark on a currency war. The yuan, which was supposed to appreciate gradually as the Chinese economy was growing, is at its lowest in five years against the $. The dilemma is strong in Beijing. On one hand, the Conservatives are in favor of a slide of the currency that would enable public firms to regain competitiveness with it and avoid laying off massively. On the other, the moderns feel that companies need to restructure and that a sharp devaluation would be only a temporary anesthetic. If the slide of the yuan, of more than 5% since the summer, accelerates, it is a true global currency war that China is going to trigger, to regain its role as the world's factory. This offensive will probably not remain unanswered in Japan, Korea and Southeast Asia.
The second threat is Saudi Arabia. It floods the planet with oil ad deflated prices, to impoverish its Iranian enemy and drive some US producers of shale gas out of the market. When the price of crude goes down from $ 115 to $ 70, cheap energy boosts growth. Beyond, the negative effects outweigh the positive effects because they affect too many producer countries, plagued by political and social unrests, which drastically reduce their imports.
The third danger is the US Federal Reserve, which raised interest rates in late December. Free and limitless money that had prevailed since the terrible 2008 crisis, is over. And that's good. However, the credit crunch involves significant risks, including that of a long-term rate hike. A bond market crash would affect the major emerging countries, such as Brazil, stuffed with dollar debts, and hamper investments.
What’s more, other threats are looming over the world economy.
In Libya chaos deepens as the country is divided, it has 2 parliaments . And yet it was the richest country of Africa before the fall of Kadhafi in 2011. But Libya is also going broke.That last tidbit should be surprising. Libya has Africa’s largest oil reserves and has long been an important supplier of light sweet crude, the kind made into gasoline and kerosene. It also had tons of money in both hoards of cash reserves and investments across the globe.But the oil, which used to bring in 96 percent of the country’s income, is not flowing anymore. From a high of at least 1.6 million barrels per day at the beginning of 2011, Libya is lucky to export a fourth of that today.And the scope of Islamic State’s attacks on Libya’s eastern oil ports expanded on Wednesday, Libyan officials said, with at least five oil tanks set on fire.
In this context, the financial markets have plunged since the beginning of the year.
The cac 40 lost 7% and practically 15% since the end of November, standing at 4333 points.
Likewise the Dow Jones lost 1500 points since the end of November. As for the Stockholm stock exchange, shadow97 asked my opinion during summer. I hope my advice to sell didn’t go unheard, it fell from 1650 to 1350.
