Although large-scale war is absent in the current world, there are turbulences involving in multiple factors. Anbound has previously analyzed that the current international market has become a "political market" with strong political elements; one of the important reasons for this is the global geopolitical and geo-economic fluctuations.
In Europe, Italy's domestic political fluctuations have become a turbulent source of the recent global capital markets. The two populist parties and their differences in policy ideas may directly affect the economic and market confidence. The expenditure plan proposed by the two populist parties alone will increase Italy's debt-to-GDP ratio from the current 130% to 177% by 2027. When the debt is too high to bear, the option is either Italexit or a breach of contract. Although the political situation in Italy has temporarily calmed down, Europe is still shrouded in panic: the new populist Italian government would threaten to leave the EU and force the EU to make concessions on budget expenditures. An analysis of JPMorgan Chase has compared the economic advantages and disadvantages of Italexit, and concluded that Italexit is the best choice for Italy. After Britain's Brexit, if Italy leaves the EU, the collapse of Europe will be imminent.
The global "trade war" initiated by the United States is another source of uncertainty. The Trump administration not only commenced the trade, investment, and intellectual property rights disputes with China, but also almost irrationally using "national security" as an excuse to launch the Section 232 investigation of steel and aluminum tariffs on its allies the European Union, Mexico, Canada, Japan, and other neighboring countries. This move immediately caused the counter-measures of the above countries. After the failed negotiations, Canada, Mexico, the European Union and other countries resorted to trade retaliatory measures against the United States. With regard to the current international situation, the Financial Times describes "international politics today looks increasingly like a bonfire of agreements, norms and rules". The trade war between the United States and China is still ongoing, while its trade rifts and norms with Europe still deepening, aggravating the turbulence in the global capital market.
Other political and economic turmoil factors include the Syria and the nuclear issue of the Korean Peninsula; these variables have increased the uncertainty of the world, and will have negative impacts on the economic development and capital market of most countries.
Although the United States is an important "perpetrator" of this turbulent world, it is also the biggest beneficiary of a turbulent world. In a more turbulent world, the United States as the most prominent world power has shown its relative security and stability. The world today is still a world with severe capital surplus. The deepening of globalization and the convenient flow of capital in the global market highlight the relative security and stability of the U.S. market. There is certainly no lack of bear markets; for example the founder of the well-known hedge fund Bridgewater Associates founder Ray Dalio said that, "We are bearish on financial assets" in 2019 and one of the bearish markets include the United States. Yet, at the same time there are also strong supporters of the U.S. market, including Warren Buffett and JPMorgan CEO Jamie Dimon. There is no doubt that the U.S. economy feels strong and will continue to grow in the coming years. Warren Buffett has said, "I'm no good at predicting out two or three or five years from now, although I will say this: There's no question in my mind that America's going to be far ahead of where we are now 10, 20 and 30 years from now… But right now, business is good. There's no question about it".
The continuous weakening of the Eurozone economies has cast a shadow over the Eurozone's future economic and capital markets. Peter Praet, chief economist of the European Central Bank, said that first formal round of talks on when to stop buying bonds is imminent. The Eurozone PMI released on June 5, Eurozone growth fell to an 18-month low of 54.1 in May 2018 and the service industry PMI was a 16-month low. Chris Williamson, chief economist at IHS Markit, said that recruitment demand and pricing power would be weakened by the overall PMI decline in the Eurozone. Moreover, with the intensification of political turmoil and the fall of a number of economic indicators, the outlook for the Eurozone is worrying. Many analysts also unanimously agreed that after experiencing the strongest economic expansion in 10 years till last year, the escalating trade war with the United State has affected the market's confidence on the Eurozone.
The risk of financial crisis in some emerging market countries, including South America and Asia, will further drive funds into the U.S. market. South American countries like Brazil, Argentina, and Venezuela are experiencing increasing economic and financial problems. The financial markets in Malaysia, Indonesia, and other economies in Asia are also facing crisis. The weak economic outlook, coupled with the strengthening of the exchange rate of the U.S. dollar, has aggravated the debt pressure of emerging market countries where capitals are continuously flowing out.
Where then, is the relatively safer market in the world? Where is the most likely haven for global surplus capital? Which market has enough capacity to undertake global funding? Anbound researchers believe that only the U.S. market has the strength to fulfill the criteria, and this is why the Trump administration dares to "challenge" the world. The world cannot be separated from the U.S. dollar and global funds seek a safe haven. This has provided enough support for the U.S. capital market.
Judging from the global situation, although some institutions have warned that the U.S. stocks of scientific and technological concepts are in danger of collapsing, and that the bubble in U.S. capital markets is too high, Anbound believes that such judgments are in contrast with the capital flows caused by the changes in global trends; it is really a trivial matter and does not constitute a key factor in subverting the situation. U.S. stocks have continued to rise amidst of volatility, and the Dow Jones index has rebounded for more than 25,000 points; all these show that the U.S. market has benefited from the global turmoil.
Final Analysis Conclusion:
The global turmoil has increased the uncertainty; the U.S. capital market will be the biggest beneficiary. If the Chinese market remains stable and open, it may also benefit from such situation.
