In a global situation where international trade friction is becoming ever so prominent as the days come along, a very real truth is that a global slowdown of the economy has commenced, and in fact, it is even going towards a recession. Despite the data showing that the economy of the United States is still in the expansionary state, a slowdown is already visible for the second half of this year, prompting the market outlook of the American economy to become bearish. To analyze and assess the situation and trends of the global economy however, we must look beyond the American economy. From a broader perspective, ANBOUND's macro researchers noticed that many economic bodies (including some stellar nations and regions) have been absorbed into this crisis, from India to Dubai, Singapore to Germany and Argentina. More problems are appearing in the economies of these countries. The ever-growing amount of problems show that the current economic problems are not regional. Even if the U.S. does not have any problems, the world has already fallen into a crisis zone.
Let us look at recent changes in each country. In Asia, after experiencing a first-quarter negative growth, South Korea experienced a GDP growth of 2.1% in Q2, and a 7-month continuous slide in the country's exports also caused the South Korean government to revise its annual economic growth target to 2.2%. Singapore also had its economic growth target revised, falling by 3.3% compared to the quarter before. The island nation's GDP grew by only 0.1%. India once regarded a rising star among emerging economies for maintaining a rapid growth rate of more than 7%, saw its second-quarter GDP grow 5% y-o-y, a sharp drop from the 5.8% recorded in the first year. In Europe, the decline in exports is making its effects seen in European nations as well. Germany's GDP slid by 0.1% in Q2, while its GDP remained flat y-o-y. The country was also about to enter a recession, which caused the economy of the entire Eurozone to stagnate in Q2, only recording an uptick of 0.2% from the month before. A troubled UK wrapped up by BREXIT saw its GDP increase by 1.5% in the first half of the year, but its economy sliding 0.2% in Q2, recording its worst quarter-based performance since 2012. Economists have long predicted a stagnation on the European economy, but a stagnation at these levels was outside the scope of expectations. In South America, Argentina has also been caught in a financial crisis. Argentina's GDP fell by 2.5% in 2018, with the Argentinian peso falling more than 90% against the greenback. The inflation rate climbed to as much as 50%, causing millions of people to drop into poverty. Estimates place Argentina's GDP growth of 2019 to be between the ranges of -1.2% and -1.3%. In Brazil, the economy of Q1 fell 0.1% from the previous quarter and grew 0.4% in Q2. This is a rare good result for Brazil among recent years. Overall, the worsening of the external situation has brought increased uncertainty to the South American economy in the coming months.
The United States, which has so far been embroiled in policy controversy, still manages to hold on to its economic growth. However, indications show that its economic outlook is not very positive. As it is, President Trump and Wall Street have been pressuring the Fed to implement further cuts on the interest rates in order to bring some stimulation to economic and financial markets. Despite this, U.S. investment and price data have shown that the country is entering a down-cycle. The recent correction in the stock market also shows the flaking confidence and anxiety among investors. Further, the yield on the 30-years U.S. government bond has also fallen to a new low, and the 10-years bond's yield has fallen below the 2-years bond's yield for the first time since 2007. With all these data, economist and investment houses warned about an impending inversion of the yield curve, and that risks for a U.S. recession are rising.
ANBOUND has provided explanations earlier regarding the situation of the current global economy. Our rationale is that the global risk takes its roots from some of the systemic problems in our world economy. The "Crisis Triangle" model proposed by ANBOUND is an analytical framework for understanding and analyzing the world. The rise of over-urbanization has caused excessive levels of credit creation, which in turns has resulted in capital surplus and an economic crisis. To add to this, wide-spread overproduction, a high information-based society, the negativities brought about by counter-globalization and the changes of the world's status quo under the global game of geopolitics have all contributed to the global economic crisis. If what the world really "needs" is a big crisis to adjust all these aspects, then it may well be approaching a tipping point to get one.
For the global economic trend, the global capital markets also are also in fear and they are continuously adjusting themselves to avoid risks. The "clustering" of funds to preserve their relative warmth has also resulted in more than US$ 16 trillion in bonds to yield below 0, and these accounts for more than 30% of the global figure. The hedging of international capital also reflects an inevitable move of the market to enter into a crisis mode. The market is in fact just waiting for a trigger or a shock to send it in to a crisis. Researchers at ANBOUND has reached a judgment that the market is waiting for a confirmation signal of sorts. This is most likely to come from a huge event in the stock markets or an outburst from notable authorities with significant world influence. Any such event will definitely trigger global capital and cause panic in the markets. We are currently in a storm, and as the storm moves along, more and more countries will be tied up in its wake.
Final analysis conclusion:
The global expansion of the economy stimulated by capital surplus is in a looming crisis. Not only are the economies of emerging markets inevitably facing huge risks, but developed nations are also on the brinks of the financial crisis, while the financial market is in the fear of uncertainties. In these heightened conditions, any small "shock" can trigger the crisis.
