Has the World Economy Slowed Down?
In early August, China’s manufacturing PMI reduced its growth pace to 47.8 in July while U.S. ISM manufacturing PMI also slowed down to 52.7 reading. Both largest economy in the world have reported the growth to be lower than previous month.
The Greek crisis has not been resolved since the economic damage is so severe. Even a new bailout will probably not be able to save the country from eventually leaving European community. In Asia, Japan’s central bank has promised to remain monetary expansion at JPY80 trillion per year. Unfortunately, the market investors have yet seen the Nikkei raising above 21,000 levels and Yen stops weakening at beyond 124.00 levels against greenback.
Most importantly, China is the centre of limelight after the Shanghai stocks fell recently. The Chinese index has lost its momentum and failed to stand above 4000 benchmarks from recent recovery. Most Asia stock indexes have slid recently following the bears emerging across the equity boards!
Towards the end of 2015, we have another 4 months to go and reckon it will be a tough time to manage the trend. Demand in most commodities are rather low for past 2 months due to rising Dollar. However, the El Nino impact that is now pouring herculean rain over many regions in Equatorial belt have begun to short-squeeze the commodity prices.
In geographical study, El Nino weather impact is caused by a temperature rise in southern Pacific Oceans and blowing northwards as hot air rises. Cold wind from northern hemisphere shifts downwards and collides with the hot wind thus causing storm showering in tropical countries. From past records, all agriculture products will face shortage from this weather disaster and begin to push up the shortage prices in the post weather crisis for estimate 6 months.
Hence, we foresee the consumer prices will rise towards Q1 2016 regardless FED decides in credit tightening. Unfortunately, the world will continue to slowdown in demand as world’s major economies tune down their growth. Stock prices will move into sideways swings while fund might move into bonds for fixed income potential.
Hence, we favour stay long in Gold and Silver for hedging in this coming stagflation. Disregard Crude for time being as global investors always prefer to lock fund into precious metal as hedge haven than the bulk drums of oil. As the major world currencies become fiat monies, only precious metals will be able to contain the real values and bring you wealth. At least, they safeguard your savings.

~ DAR Wong is a registered Fund Manager in Singapore with 26 years of trading experiences. The expression is solely his own. He can be reached at dar@pwforex.com