Global Slowdown Worse Than Expected
Monday, December 8th, 2008
By George Leong, B.Comm. for Profit Confidential
There’s no doubt about it; the current investment climate is harsh and could get worse as we move into 2009, as investors realize the current problems in housing, credit, jobs and the economy will not be righted by a quick-fix by President-elect Barack Obama. Add in the global economic slowing and you have the potential for more hurt in 2009.
Markets are set to retrench as much as 45% this year in what will be one of the worst years for stocks. People have lost tons of money in stocks and 401ks. Pension funds have seen major losses and hedge funds are closing, as massive redemptions force funds to liquidate in some cases.
Just take a look at some of the evidence over the last several weeks.
Oil is caught in a downtrend to the $44.00-per-barrel level, as global economies slow and the demand for energy falls. Great for gasoline prices, but a bad sign for economies.
The National Bureau of Economic Research suggested that the United States has been in a recession since December 2007. The U.S. third-quarter GDP contracted in the third quarter, and is expected to see additional slowing in the quarters ahead.
The Paris-based Organization for Economic Cooperation and Development (OECD) suggested that the current financial crisis could drive the developed countries into the worst recession since the 1980s. The OECD predicts the U.S. economy will shrink by 0.9% next year, with GDP of the 30 major market democracies contracting by 0.4% in 2009.
Germany is the latest country to announce a contraction, with stimates calling for the country’s GDP to fall 0.8% in 2009.
China and India are seeing slowing. In China, the government introduced a $586-billion economic stimulus program. The capital infusion is critical due to China’s key role in the global economies. Failure in China could have a domino effect worldwide.
As we have been saying, the degree of the market risk is extremely high. We feel that the slowing in the global economies could be worst than expected, translating into a painful beginning to 2009 and extending at least several quarters.
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Tags: china, China's GDP, GDP
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George is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.
