For the shareholder, this was not a good year. Since December of 2017, the German Dax index has lost around 16 percent. Thanks to the weakness of the Euro, it looked from a German perspective, in other regions a little better. Calculated In euros, lost the Chinese stock index, Hangseng less than 10 percent. The MSCI world in Euro, and the American Index S&P 500 won, after all, still a good 5 percent. Many Economists attribute the weakness of the equity markets on political uncertainty. The trade dispute between the United States and China, the effects of higher interest rates in America, emerging markets, Brexit and the dispute between the Italian government and the EU Commission about the state’s finances are often cited as reasons. However, it is emphasized that there are no signs of a recession. America’s economy is under steam, the summer growth weakness in Europe only temporarily. Not a well-known Institute is forecasting a recession in the next year.
the stock markets Exaggerate so once again, and there is no reason to worry about the economy? I would like to contradict. Certainly the stock markets are not a reliable economic indicators, because they are too nervous. In the course of the decades, they have displayed more of a recession too much than too little. However, the warning signs, the stock markets will be supported by appropriate signals from the economy. Many American and European Economists miss this because they focus on indicators of their respective national economies and the global contexts of neglect.
The world economic Ruhr of the Ifo-Institute
A chance to look at the global economy overall, the so-called Ifo world economic dysentery. The Ifo Institute is more than 1,000 economic experts from multinational companies and competent institutions from over 100 countries in every quarter to the current economic situation and their expectations about the next six months were interviewed. From the constellation of assessing the current situation and expectations of the Position in the economic cycle. Like the hand of a clock, the thus determined Position in the cycle of the recession (6-9 p.m.), travels on the upswing (9-12 hours) and Boom (12-15) in the downturn (15-18), and in the next recession (18-21 or 6-9 PM).
The Economic clock is not perfect, but quite useful early indicator for the economic cycle. The difference of the two components of the economic Ruhr, so the assessments of business expectations, minus the location (in short: the cyclical position of the economy) the annual rate of growth of the world economy by about a year and a half. Currently (as of November) shows the world’s economic clock to about 17 hours, so in a downturn, is still an “hour” of the recession. Thus, the clock is back where she stood for the last Time in the first quarter of 2008, just before the start of the last recession. In contrast, the hands of the American or German clock only to 15-16 o’clock, position the economy so more like the beginning of a downturn, as at the end of it.
investors must business be prepared
The global (in dollars expressed as a) stock index MSCI-world of the time quite good, the economic position in the world. Sometimes he tends, however, to Under – or Exaggerations. The MSCI world slipped in early 2016, significantly below the economic position, which had deteriorated in the course of 2015 is only moderate. Apparently, the share feared the market would be another downturn, however, thanks to a Chinese credit impulse and the reduction in corporate taxes. On the other hand, the stock market ignored a long time the global economic slowdown, which became apparent already in the course of 2017, and this year the momentum began. The fall in the share index since September can be seen as a correction, which brings the market closer to the economic position in the world economy.
It would be wrong to infer from the state of the world economic Ruhr and the recent development of the stock markets, that the next recession is imminent. Unlike a normal clock, the pointer of the economic Ruhr can be reset temporarily. Unexpected loosening of monetary or fiscal policy in America, or China, or a positive caper in the trade dispute between the United States and China could make this happen. On the other hand, you should not trust. For the shareholder this means, to prepare his Portfolio for a recession-related slump in the market.