Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Emerging Market Economies Indicate Economic Slowdown for Global Economy

Friday, May 10th, 2013
By for Profit Confidential

Economic conditions in the U.S. economy may be improving slightly, but the global economy is on the verge of witnessing an economic slowdown—and a possible recession. Key indicators are flashing red signals and warning of trouble ahead for the global economy.

In these pages, I have written rigorously about how the main economic hubs of the global economy are witnessing an economic slowdown, with the eurozone and Japan in an outright recession. The Chinese economy is slowing down, and emerging market economies are now starting to show concerns, as their troubles are quickly brewing.

This week, the central bank of South Korea cut its interest rates to 2.5% from 2.75%. The main reason for this cut in rates was deteriorating exports. In March, industrial output for the country declined 2.6% from February—the biggest decline in a year.

Similarly, central banks from countries like India, Taiwan, and the Philippines may do the same and cut interest rates to boost their exports and economies.

Emerging market economies export to developed nations in the global economy. If these emerging markets experience an economic slowdown, it will mean that demand is weak in the developed countries.

Other key indicators, like industrial metal prices, are reaffirming the economic slowdown.

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Consider the price of aluminum, a metal used in many different technologies. On the London Metal Exchange (LME), aluminum traded for about $2,100 per ton at the beginning of 2013. Fast-forward to today, and the price has declined almost 12% to around $1,850 per ton. (Source: London Metal Exchange web site, last accessed May 9, 2013.)

Likewise, other industrial metals, such as copper, are signaling an economic slowdown or even a recession ahead in the global economy. The price of copper has declined roughly 13% since the beginning of the year.

The decline in corporate earnings and gross domestic product (GDP) in the U.S. may be one thing, but I am worried about higher unemployment and more misery for Americans who are already struggling.

The recession we witnessed in 2008 was a result of a U.S. domestic banking system on the cusp of collapse because of our housing bust. But this time around, the problems are coming from the global economy. Be very careful if you are heavily involved in the stock market.

What He Said:

“I see a deal when it’s a deal. And right now there’s a good ‘for sale’ sign flashing on gold bullion and gold producer shares. In fact, after peaking at the $690 an ounce level earlier this year, gold could be a bargain at its current price of around $650 per ounce. As a reader, you are undoubtedly aware of my negative stance on the general stock market and the U.S. economy. As the economic problems continue to brew in the U.S., as these problems develop into others, and as they are finally exposed, what other investment but gold will worldwide investors turn to?” Michael Lombardi in Profit Confidential, March 14, 2007. Gold bullion was trading under $300.00 an ounce when Michael first started recommending gold-related investments.

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Michael Lombardi - Economist, Financial AdvisorMichael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Some of the stock recommendations in Michael's various financial newsletters have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter or Add Michael Lombardi to your Google+ circles

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