Overall, economic data from the US, Europe and China is weak, and consumer and producer confidence is quite low in many places.
Bank of America CEO Brian Moynihan WatchingConsumers are much more reluctant to spend money than they were last year. At the same time, Moynihan said, about 10% of banks are 69 million customers — is relatively optimistic and doesn’t think the U.S. will fall into a recession this year.
This was initially predicted by his economists. Earlier this month Investors were pretty nervous. Stock markets around the world were hit hard, especially in Japan. Since then, he has made an almost complete recovery.Is this justified, or is a sudden economic downturn on the horizon?
Political issues are one of the main threats to the economy. Trade restrictions, sanctions and geopolitical conflicts could further degrade an already fragile and over-indebted global economy.
Political uncertainty will be very high in the coming months. First, the US elections are very exciting. Kamala Harris may currently be leading Donald Trump by a few percentage points in the polls, but the nature of the electoral system; The latter could still win the presidency with 47 percent of the national vote.
The second major political uncertainty is Chaos in the Middle EastIran is still expected to strike back in retaliation for the removal of Hamas and Hezbollah leaders in Tehran and Beirut.
Iran is widely believed to want serious retaliation but does not want to provoke a response like an Israeli military attack on Iran’s nuclear facilities, while Israel has a leader who appears to have no intention of bringing stability to the region.
For now, financial markets have not been too shaken by the conflict, especially in terms of oil pricing, but that could change if Israel and Iran come into more direct conflict as doubts about regional oil supplies and shipping routes grow.
The third threat is Ukraine WarThis risk feels similar to the risk from the Middle East in that the Middle East war has not driven the markets for quite some time, but this could change with Ukraine making a bold move into Russia’s Kursk region. The natural gas market is already There was some movement.
Vladimir Putin will not tolerate this and it is quite possible that the war will escalate further. If Ukraine holds out on Russian soil for any significant period of time, it will seriously undermine Putin’s position. In the worst case scenario, he will be ousted. However, this would not necessarily be a good outcome for Ukraine and the West, as an even worse hard-liner could replace Putin.
With growing political uncertainty in Europe and the United States and tensions between central banks rising, the political ground for the global economy and financial markets could not be more fertile.China-Russia-Iran-North Korea axisAnd then there’s the West and the three challenges mentioned above. Further destabilization seems inevitable.
This is why assets considered safe havens appear to be wise investment choices. Money is one of them.This potentially also applies to commodities, but there is a risk that upward pressure from capital inflows into safe-haven assets will be offset by downward pressure from a weakening global economy.
From a political perspective, in some sense what is true for commodities is also true for the dollar.Typically provides a safe haven for investorsIn uncertain times.
But the question is whether the dollar can remain such a safe haven when most of the uncertainty stems from the U.S. Concerns stem, for example, from a sharp deterioration in U.S. finances and the selling off of dollar reserves by authoritarian countries, including China, which fear the dollar will be confiscated or frozen.
Finally, regarding the impact of politics on interest rates, short-term interest rates in the US and Europe may come under further downward pressure in the near to medium term as political developments dampen global growth expectations and incline central banks to cut interest rates.
However, long-term interest rates, particularly in the United States, are unlikely to fall as non-Western countries continue to seek to diversify their foreign exchange reserves and reduce their holdings of U.S. Treasuries. Also, fiscal recklessness, protectionism, and renewed disruptions to supply lines will put upward pressure on inflation over time.
This also means that the inverted yield curve may be approaching “normal” levels.The US yield curve briefly turned positiveThis is the first time since July 2022.
Andy Langenkamp:ECR ResearchandICC Consultant.
