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Where to look for indication for potential crisis
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Loading...The broader view is to look at GDP growth, and if it is down for six consecutive months, economists believe the economy is in recession.
However, for traders and analysts, there are several early signs of a recession. They look first and foremost in the manufacturing sector and, in particular, in newly created jobs. This is because the manufacturing sector receives orders and contracts for a long horizon ahead and if the sector experiences a delay, this is reflected first in the number of new entrants.
Another indicator that economists monitor is the order of durable goods. These are the non-current assets of the companies as a production technique. Investors and managers are more likely to buy equipment that will be used in the long run if the horizon is bright to the economy, and alternatively, they tend to be less likely to buy and invest if there are fears about the economy.
If we look at the United States' recent data on the newly-employed in the manufacturing sector, the red light should start to shine:
United States Durable Goods Orders are still stable:
Despite the chaotic downturns can not bring much calm and positivism, but data nevertheless exceeds the average for four months:
If we analyze the US economy, we can not miss out on retail sales, which are a major component of GDP as the economy moves from consumers. In this regard, it is also good to keep track of consumer confidence and how many users are willing to buy.
Getting out of the largest economy in the world and looking at a larger scale:
Risks such as the US-China trade war already sound rather banal, and the only consequence that led to a very healthy correction of the markets. Looking at Brexit and the many speculations, most analysts expect a delay, and this issue may take another two years or more, which is an initial transit transit period.
One of the most controversial theories about the cause of the next global crisis is the high level of debt in China. However, Wells Fargo economist Jay Bryson told CNBC's "Squawk Box Europe" six months ago that he did not believe this was going to happen. The reason is that China's debt is held in China and not scattered all over the world 10 years ago in the form of Collateralized Debt Obligations (CDOs).
Looking at things, the only major risk remains the newcomers in the US manufacturing sector. And there should be a focus on the next NFP in early April, as a further decline would result in six consecutive months of decline. This would already be worrying about the fundamental point of view
Ray Dalio is one of the investment gurus, but he even lowered his estimate of a likely coming recession in the next year to 35%.
If we ask another gurus to invest, Warren Buffet, economic crises and market bubbles are created by greed. He says that the thought of people "My neighbor is more stupid than me, but he makes a lot of money, why not me?" is devastating and is the cause of the bubbles inflating in the market, which sooner or later are bursting. This scenario did not work with the collapse of the cripples from the beginning of 2018 and the world economy remained whole again.
The topics in which we can look for positivism for the future development of economies are AI and 5G. The widespread perception that artificial intelligence will take a large number of jobs and that is a danger to the economy is totally wrong. AI will not end on its entry, on the contrary, the need for maintenance and deployment will create more jobs than it will eliminate under the world's leading research, and this process will go on for well over 2 3 years, with the lead time expected to last at least until 2030. 5G quite modern in recent months, as Trump and other world leaders are already talking about 6G is a sphere that will also create many new jobs and at the same time create a new huge wave of consumption.
A little extraordinary expectation is that the next economic crisis will come from a cyber attack or a power supply grid failure. Although this sounds like science fiction, this is an event we have not seen before in history. Against the billions spent every year on cybersecurity, this potential cause should not be underestimated. If one morning we wake up and we do not have access to our money due to a cyber attack, this will cause turmoil and may cause a large-scale crisis.
Trader Nikolay Georgiev Read more:
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