new economy

　　

Note that there are spoilers ahead. I am going to reveal the ending of Agatha Christie's classic thriller "Murder on the Orient Express" (Murder on the Orient Express). There are a total of 12 suspects, and the truth is that they lined up to stab the victim with a dagger. For the worst global market sell-off since the 2008 financial crisis, at least 12 criminal suspects have been identified. The most worrying thing is that they all contributed to the selling.

OPEC

    Refusal to cut production has caused oil prices to fall all the way to a level that almost caught everyone off guard. Yes, this is a boon for consumers and any oil importing country. But for everyone else (especially for the US economy, which has become dependent on the energy industry for growth in recent years), the short-term impact is dire.

Sovereign wealth fund

    Sovereign wealth funds are to a large extent established with wealth derived from petrodollars. Falling oil prices are likely to have forced many sovereign wealth funds to start selling. They generally sell the most liquid and profitable assets in their holdings, such as Japanese or American stocks. In Japan, the "big sale" of sovereign wealth funds has been publicly criticized and accused of being responsible for this round of selling.

China stock market

    China’s A-shares fell suddenly after the bubble burst, which ignited concerns last year; the authorities tried to curb the stock market’s decline last summer and autumn but failed. This fact turned people from worry to shock. Any sign of China's poor health is still a cause for concern-so this year's A-share setback has caused damage to everyone.

Renminbi

    Yes, China can rightfully argue that its clumsy devaluation of the renminbi against the US dollar in August and last month was just to maintain the stability of the renminbi relative to a basket of trading partners’ currencies. However, the speed at which the authorities are depleting the country’s foreign exchange reserves and the seemingly eagerness of the Chinese to transfer their wealth abroad are sounding real alarms. The forced devaluation of the renminbi will be a thing that will change the situation.

Federal Reserve

    This factor is easy to explain. Since 2009, the stock market's rise has been tracking the inflation of the Federal Reserve's (Fed) balance sheet. Everyone is afraid of what will happen after the Fed finally raises interest rates. As a result, the Fed delayed for too long before raising interest rates, and just as it finally started raising interest rates, the slowing down of employment growth and the backlog of inventories suggested that the US economic cycle was nearing an end. After the Fed raised interest rates in December last year, high-risk assets around the world reacted strongly.

Corporate profit

    In the noise of the past few weeks, news about the profitability of American companies has been drowned out. If the performance is not bad, these news will not be overwhelmed. But the truth is that the performance is terrible. According to Thomson Reuters (Thomson Reuters) latest estimates, S&P 500 (S&P 500) constituent stocks fell 4.1% in the fourth quarter of last year. After the companies themselves have issued pessimistic forecasts, it is expected that the current quarter will be very bad, and the forecast for the whole year is being significantly lowered.

Negative interest rate

    Following the European Central Bank (ECB) and Riksbank (Riksbank), Japan has also begun to implement negative interest rates. These measures were originally intended to show the determination to fight deflation. On the contrary, the market's message is that these central banks are prepared to sacrifice the profits of the banking industry, even if the banking industry has not received proper capital structure adjustments after the financial crisis, especially in Europe. The result is a sell-off of bank stocks, which has led many people to believe that these central banks have run out of ammunition-if even negative interest rates are useless, what else can they do?

U.S. economy

    At the beginning of the new year, these bad news have been included in prices to a large extent-but the mainstream view is that the US economy is still far from a recession, and this will limit any "downside" space.

    The most special thing is that the bond market has sent a typical economic recession signal: the yield curve is flattened-compared with the past, the difference between the yields of long-term bonds and short-term bonds is much smaller; historically, this may be the imminent economic recession The most reliable indicator of arrival. This exacerbated people's anxiety.

Irrational exuberance

    One of the key arguments of those who are bullish on the United States is that the long bull market that began in 2009 has been "hatred"-no one has ever trusted it. This implies that the market has room for further upside before it really peaks. However, reliable long-term valuation indicators seem to indicate that the US market is seriously overvalued and is currently in a boom of irrational prosperity. After the market turned, it was obvious that no one thought there were any assets that were too cheap, so no one wanted to buy in.

Everyone has a share!

    The voters frightened the poor investors. The United States may elect the socialist Bernie Sanders, the gold standard believer Ted Cruz, or Donald Trump as President of the United States, and the United Kingdom may vote. Withdrawing from the EU, there are still various populist movements within the EU, all of which show that ordinary people feel increasingly dissatisfied with the status quo. This feeling is very forgivable, but it makes the capital market uneasy.

    Whether in the United States, the United Kingdom, Germany or Japan, it is precisely because the government has not tried to launch a proactive fiscal policy that it has forced the central bank to come forward to fill the gap. Since monetary policy seems to have lost its effectiveness, perhaps politicians should come up with a consensus and come up with some measures, such as recapitalizing European banks or rebuilding US infrastructure.