The threats keep coming, Russia, Iran, Syria, Brexit, Inflation, trade wars, radioactivity, Middle East and Korea. The IMF report and the Global Financial Stability report did not help allay my concerns, instead, it added to them. Add to that, 75% of the ultra rich say a recession is likely in the next two years.
They even said: “Financial vulnerabilities, which have accumulated during years of extremely low rates and volatility, could make the road ahead bumpy and could put growth at risk.”
“Valuations of risky assets are still stretched, with some late-stage credit cycle dynamics emerging, reminiscent of the pre-crisis period… This makes markets exposed to a sharp tightening in financial conditions, which could lead to a sudden unwinding of risk premiums and a repricing of risky assets” they added.
Add to this that the world debt is at a record $164 trillion, just as EU, UK and US Central Banks are raising rates.
And there is more, GDP growth is set to slow in 2019 compared to 2018.
Combine with this, rising rates, as warned by the likes of Goldman Sachs, and you have an explosive mix potentially.
What would possible reason with growth on the cards worldwide OPEC and Russia have to cut supply? It’s hard to work out any reason and so the price of oil would bubble up would be the logical deduction. You only have to look at oil consumption, and China and India are the second and third largest consumers to know combined with their GDP growth rates, demand is in place.
And now for good news
UBS put well: “Global equities are supported by solid earnings growth. US companies, which make up about half of the global stock market, are benefiting from tax relief and a new fiscal spending package. By price-to-earnings ratio, the global stock valuation is slightly below long-term average. We remain overweight Eurozone versus UK stocks. Given their cyclical sector composition and high operational leverage, Eurozone companies are well placed to benefit from robust global demand, while UK firms should lag other regions in terms of earnings growth. We are also overweight emerging market (NYSE:EM) versus Australian stocks.
What I love about big banks is when they are direct. UBS certainly were that:
Each year I look at the patchwork pictured above or winners and losers, and each year I know not to forecast the next.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I do actively trade forex and am long US stocks not mentioned in the article.