Currently, all worlds' media are overcrowded with news about the coronavirus. The number of new cases, the number of recovered, tests, quarantine measures – a fear paralyzed the whole world, as if there were no other problems, write the Navagates review.
However, in early 2020, the world faced several challenges that had to be addressed at all levels. Here is a shortlist of them:
- overheating of the US economy;
- US presidential election;
- default on the Chinese domestic bond market;
- the slowdown of economic growth in India;
- trade wars between China and the USA;
- unrest in Latin America.
When the panic associated with the virus goes down, all these problems need to be dealt with. Navagates broker experts suggest refreshing the list of some challenges in different countries.
Stock market: a colossus on cotton legs
The year 2019 was not bad for the US securities market, which can be tracked on navagates.com reviews. After a poor 2018, the leading indices won back their positions and added a lot, from 28 to 35%. Is this a good signal? Not really, experts at Navagates forex broker said. After all, the fall of 2018 happened for a reason. Ten years after the last global crisis, the US economy has grown without a recession. But it cannot continue for a long, and in 2018, the first signs of the impending crisis appeared. At navagates.com reviews, you can find news detailing these symptoms. Therefore, stock indices fell.
So why did stock indices win positions again in 2019? Does it mean that investor interest in US stocks is resumed, and there will be no crisis? No, experts at Navagates forex broker said. The reason is other assets - currencies and treasury bonds - are less profitable than stocks. Warren Buffett alone sits on a suitcase with $128 million cash. Obviously, the famous trader knows what others do not know. Namely, the growth of stock indices is based on bare optimism. Players neglect risk assessment, write analysts at Navagates broker. Even now, when the indices fell to the lows of 2007-2008, a rapid upward roll followed. The market says - no, this cannot happen to me again!
Probably, maybe. If a short-term economic recession caused by an epidemic and quarantine can cool the overheated US economy, the Americans will live without large-scale crises for several years. But if the downturn is protracted, the forecasts of Navagates broker experts are the most unfavorable.
Revolution, unrest and military threat
Worrying reports arrived from Hong Kong shortly before the outbreak - the Chinese authorities decided to tighten their policies, which Hong Kong residents did not like. Protests, demonstrations, police attacks, dispersal took place every day. With the advent of coronavirus, protests ceased. Now, Navagates forex broker analysts have to find out if the Chinese authorities can take advantage of the situation and suppress protests forever.
Hong Kong is not the only problem region in the world, recalls the Navagates review. The occupation of some Ukrainian territories by Russia continues. In Iran, a taut situation intensified after the assassination of General Suleymani. Probably, for this reason Iran now has the largest percentage of infected people in the world - the more people think about the disease, the less they will be interested in politics.
Political instability intensified in Latin America. Investors at the Navagates broker who is interested in this region should be aware that the epidemic does not solve the problems of the area - rather, it exacerbates them.
It's no secret that hot spots on the map often coincide with the map of oil fields. Therefore, in the Middle East, wars and skirmishes do not cease. Both Iran and Latin America are significant players in the oil market. The recent conflict between Russia and Saudi Arabia has led to falling oil prices below $ 20 per barrel. Of course, the price will not remain so low for a long time, a rollback is inevitable, writes the Navagates review. But it is unclear how much oil can compensate for the lost positions. The budget of many oil-producing countries is based on the profits from the oil trade. If this profit turns out to be several times less than expected, the authorities of oil-producing countries may not cope with the situation.
The trade war between the USA and China
It has long been no secret that the Chinese authorities are doing everything to make the whole world dependent on Chinese goods. So, Beijing allocates large-scale subsidies to industrial enterprises, which, according to the Navagates, is simply a scam. This makes Chinese products the cheapest in the world. It is not a surprise that buyers from all the world order goods in the Chinese online hypermarket Ali Express. The business either buys on the Alibaba wholesale market or signs contracts with enterprises directly. But this is a direct threat to buyer countries, experts at Navagates broker warn. Firstly, national enterprises cannot compete with China, and they are closing. A hidden threat in this trend appeared when the world saw after the closure of borders. Many countries were left without essential goods because they were used to buying them from China. Secondly, there are more significant threats. For example, the notorious Chinese concert Xuawei manufactures and supplies electronics, from smartphones to complex electronic banking systems. In terms of price-quality ratio, the products of the Chinese concern hold a leading position in the market. But technicians sound the alarm: it turns out that the capabilities of the supplied equipment are more extensive than declared. In particular, there are severe concerns that Chinese electronics regularly leak data to the manufacturer, and, as Navagates broker suggests, is vulnerable to scam. It's scary to imagine what opportunities are opening up for Chinese analysts after processing such data about users from other countries.
There are also other reasons why dependence on Chinese exports can be dangerous for other economies. Therefore, authorities in other countries, including the United States, are trying to limit the supply of Chinese equipment through direct bans and imposition of protective duties. Of course, such measures have a lot of opponents, both in China and in the USA. In December 2019, Donald Trump and Xi Jinxing signed a trade agreement, which can be found in the Navagates review. Alas, in the current format, it does not answer all the challenges described. After the agreement was signed, the stock market grew slightly; however, it is difficult to predict how US-China relations will develop after quarantine. Now China must make its move, but the country is still recovering from the epidemic. The problem is that the city of Wuhan, where the epidemic began, and which was most affected by quarantine, is the country's largest industrial center.
So far, analysts at City Investment Bank and Navagates broker are betting on rising prices for copper, palladium, nickel, and coked coal. Of course, the price of gold soared to a six-year high as a safe asset. It is assumed that it will continue to grow further.
US Central Bank Rate
Back in December 2019, the current head of the Fed, Jerome Powell, said that until 2021 the Fed's base rate would not increase. And on March 16, at an emergency meeting of the Fed, it was lowered to almost zero. What is this witnessing about? Fed management continues to pursue a weak dollar, according to Navagates forex broker. This means that the American currency will be cheap enough for profitable and affordable dollar loans for developing countries. Consequently, capital flows to India, Brazil, and Turkey will not stop. This is a reasonable policy as long as the US economy is strong enough. But alas, the United States has enough of its systemic problems. If inflation in the country intensifies, the rate may be raised back. This will reduce the yield on government bonds of developing countries.
But that's not all, analysts at Navagates forex broker continue. Along with a decrease in interest rates, the US central bank softens banking regulation. Some analysts at Navagates broker consider this an alarming factor. The combination of soft credit conditions with a low interest rate can lead to the fact that financial institutions and investors will increase lending volumes and increase risks. In the short term, this will push the economy, but if these positions begin to collapse, it can cause a severe recession.
As always, investors at Navagates forex broker keep a close eye on US unemployment. Last year, it decreased gradually until it reached the level of 3.7% - in July 2019. Then the Fed for the first time since 2008 lowered the interest rate. And historically, if the Fed cuts the rate with low unemployment, a recession always ensues.
Well, this time was no exception: the epidemic and quarantine shook the US economy well. The number of initial applications for unemployment benefits (that is, people who have recently lost their jobs or first felt the need for welfare) has already exceeded 4%. The coronavirus is blamed for everything, but as seen in the Navagates review, there were enough reasons even before the epidemic.
US Presidential Election
US presidential elections always affect the financial market. And the question is not only which candidate wins - the point is how the next president will influence the economy and finances of the largest economy on the planet. For example, President Trump has introduced a tax incentive program, which triggered economic growth. The stock market alone grew 45%, as seen in the Navagates review. Trump critics say the stimulus was excessive; the US economy is now overheated. In 2020, the incentive program ends. The next president, whoever he or she is, will accept the country at the height of growth. The end of the program will lead to a decrease in the growth of the entire economy. And this will reduce investor confidence in the economy of the United States and the whole world - which will certainly affect the stock market.
Emerging Markets Spotlight
They say that the higher you go, the more painful it is to fall. This is true - as well as the fact that those who already below are not afraid of a fall. We are talking about the economies of developing countries, which were in crisis before the epidemic. While leading economies are slowly recovering, some of the emerging economies could make a sharp leap. Although it is unlikely it will be India: recently, in this country, economic growth began to slow down, as seen in the Navagates review. In addition, the Indians, until the last moment, ignored the threat of the epidemic and introduced quarantine only at the end of March. However, most of the country's population was not ready for this, so now thousands of Indians are literally looking for food. So far, there is no reason to think that India will pass the crisis easily and quickly recover. So the attention of Navagates forex broker investors is riveted to other assets. Unexpectedly, the Japanese assets are trending: the country went through a crisis of overproduction and may return to the list of leading economies. At least in 2020 the economic growth in Japan can be more than 4%. But the securities of Argentina, Lebanon, and Zambia are now considered a risky asset: in these countries, default is already possible in 2020.