Is the Global Economy Really in Trouble?

By in
Is the Global Economy Really in Trouble?

The global economy is not the strongest it has been. Volatility continues to hurt it, and many more signs point to a weakening economy instead of one that is still growing. The conditions seem to be a perfect storm, with many moving factors contributing to a general sense of unease reminiscent of 2008.

A glimpse around the world.

A combination of factors around the world are contributing to the volatile conditions the economy faces.

Europe is struggling. Questions of some countries possibly exiting the Eurozone have left investors feeling wary, resulting in uncertainty felt throughout the markets.

China’s transition into a consumer economy is still driving massive volatility. The effects of China’s drastically swinging market was even felt here on Wall Street, resulting in steep sell offs during late summer of 2015. As China slows down, the rest of the world seems to slow down with it.

Emerging markets are in a slowdown as well. With China’s downturn, demand for their products has fallen, resulting in many countries incurring loads of debt.

Oil prices continue to stay low. Even Saudi Arabia announced a new plan to diversify its economy, signaling their lack of faith that prices will rise again. The falling oil prices are a result of falling demand, which means less producers are demanding oil to make new goods.

Problems at home.

The US is not immune to these problems.

The strong US dollar, due in part to a weakening global economy, will hurt companies at home, as it makes it more difficult for them to sell their goods and services abroad.

All of this makes it incredibly difficult for the Fed to do their job. While they still say they plan on raising rates, global indicators point to this being improbable. This is just another factor adding to the uncertainty plaguing investors.

Furthermore, there is worry among analysts that companies are not doing as well as reported. Although earnings are increasing, many argue this is due to cutting costs and not increases in revenue, which may mean our economy is not growing like we thought it was.

Is it 2008?

We cannot know this for sure. We do know markets are driven by fear and greed, and the current state of the global economy does point towards everyone feeling afraid. If this is true, it could lead to another market correction. Will it be 2008? It depends on how afraid we are.

Leave a reply

Your email address will not be published. Required fields are marked *