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Playbook for 2019 - What is the trend like and where will the Money Flows go
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Loading...The world is changing fast and the year 2019 promises to be even more confusing and chaotic. The rise of East China and populists in the West means that by the middle of 2018 the economies run by the main democratic parties account for only one third of the total gross domestic product of the 20-nation group, down from 83% in 2007 And that was before the election of two more populist presidents - Andres Manuel Lopez Obrado in Mexico and Jair Bolsonaro in Brazil.
Countries that we thought were easy to predict now become more and more difficult to read.
Whether this cataclysm is due to technological revolution, income inequality, clash of civilizations or Western arrogance (choose your poison), the trend will continue. In 2019, a number of these post-Cold War transitions have the potential to be in the headlines, with each one carrying the "worst case".
Among the catalysts that will be responsible for the market movements in the new year, high priority is given to:
New Force Competition - On December 4, Donald Trump gave Russia 60 days to comply with the Inter-Nuclear Force Treaty. Time ends in February. The 1987 treaty was negotiated between the US and the then Soviet Union to dismantle thousands of mid-range nuclear missiles in Europe. In the worst case: the United States is leaving, and Russia has previously banned missiles for its western neighbors, already imposing a weaponry race on high-tech weapons and throwing a political grenade into NATO, as the United States and Eastern and Western Europe divide to react in kind.
Russia - 2018 Willis Towers study Watson found that his big clients had suffered the largest losses in Russia, often as a result of sanctions. So Russia gets its own category. The Kremlin may have refused to cultivate Trump after canceling two meetings with President Vladimir Putin by the end of the year. Russia's interference in foreign elections and its efforts to expand the influence of the Balkans and the former Soviet republics seem to continue, and further sanctions are subsequently imposed in the United States. In the worst case, relations between the United States and Russia are falling into open hostility, affecting arms control and areas where they have been able to cooperate so far.
Trade war - The 90-day customs ceasefire expires at the end of February, with which Trumpi President Xi Jinping has agreed to the recent G20. If they fail, US tariffs will rise by a $ 200 billion tranche for imports from China. The S & P 500 market, as events multiply and then undermine the truce, show the bet. Worst case: a full-fledged trade war that expands into an open struggle for strategic domination by the end of the year, undermining growth and security around the world.
Economic Growth - Several Bank of Japan representatives have warned that the global economic outlook is worsening and recent oil price slump would slow down the further achievement of a 2% inflation target. This is mentioned in the December Prospectus Review of the Bank. "Unclear about the global economic future is deepening. Under such conditions that are likely to continue, risks are targeted at weaknesses, "said a bank representative. During its December meeting, BOJ kept its monetary policy steady, but its governor warned of the rising risks to the economic outlook stemming from the fears of a slowdown in global growth that disturbed the markets.
We have entered a stage where the high volatility and the huge movements of the major stock indices (in any direction) are considered a normal day in the office. Many investors consider the high frequency trading boom of the last few years to be a major factor in this market situation, but the truth is that we simply live in an extremely volatile environment with a lot of uncertainty and uncertainty. Commercial wars, real wars, and economic growth are just some of the catalysts that will drive prices in 2019 and in the future.
Another, no less important from an economic point of view, is the path of the Fed's monetary policy. The central bank has begun to signal a slowdown in promotions. Over the past two years, they have risen steadily in interest rates, creating a tangible difference between US policies with other major players - Japan, Europe, China, Australia, New Zealand and the UK. The Fed signs coincide with the more aggressive (hawkish) tone of Mario Draghi by the ECB, which leads us to conclude that the large spread in interest rates may begin to decline. Another sign of a slowdown on the part of the United States is the reversal of the yield curve of the state securities, which means that the short-term outlook is now more secure than the long-term anomaly in itself. Whether the Fed reaches the ceiling of current economic conditions and will start to catch up with the ECB is an issue that arouses ever more attention from investors - if and when that happens, it is expected to reverse the FX markets, with the euro having a big way to go, and the dollar is high and the fall will be painful. As early as the first week of the new year, we expect a statement by Jerome Powell from the Fed, which is quite realistic to set the stage for the new year.
The actual Brexit remains a little over 3 months, and things are more confusing and vague than ever. It seems that Britain is approaching the possibility of how to cross Brexit in several different ways. This, after all, may not be such a bad option.
When we have a particularly "slow" group of students who can not pass the easiest exam, a pretty good and easy solution is by offering a test with several different answers. Faced with choosing between four possible answers to one question, the chances of even the poorest student to correct the answer will rise. The current, chaotic political situation seems to take things to a "test" with three or four possible answers. However, it is unclear whether Parliament or society will be tested - probably both. Strangely, but this may be the best way to get out of the situation. With less than 100 remaining days to Brexit, Theresa May will hardly try to reject this opportunity. The test with several possible answers has three advantages. First, voters will be more aware of what they are actually voting on. Secondly, a much larger majority in the vote will be created, which will strengthen the democratic legitimacy of the event. Third, the people of Great Britain will be 100% responsible for the final decision. There will be no more excuses, or at least they will be much less than now, where Parliament produces a version after a development event and another Brexit. Unfortunately, however, the options will be more divisive than unifying. The British people will have to decide, but it will be a decision that will not bring with it the mood for easy escape from the situation. Fabulous plans for a comfortable level of exit from the EU to meet all the demands of the people. Let voters be given the option of several voting choices and let them vote as they see fit. That would be the most honest for them. By analyzing possible outputs, most of them will eventually lead to currency stability and recovery. However, generally, each outcome leads to short-term pain for pounds. So probably pounds will rise, but there is no point in buying before at least part of the clouds (and risks) do not disappear.
Trader Aleksandar Kumanov Read more:
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