Tipping Point (Part 4):
Major World Equity Markets Poised For Decline
The most recent estimates for the total market value of US stocks traded primarily on the New York Stock Exchange and Nasdaq are roughly $34 Trillion (https://www.nasdaq.com/article/us-stock-market-is-biggest-most-expensive-in-world-but-us-economy-is-not-the-most-productive-cm942558). Of that mind boggling figure, the “Four Horseman of the Nasdaq Collapse” alone account for nearly $4 Trillion, or 12% (https://markonomics101.com/2018/08/23/tipping-point-part-2-the-four-horsemen-of-the-nasdaq-collapse/). But what about the entire world?”
According to the Nasdaq, the non-US world has a total market capitalization of $44 Billion. Major world markets include India, Japan, China, England, France, Hong Kong, and Germany. The growth in globalization and Trade makes these markets tremendously interconnected and none is insulated from fortunes of the others. Were that the case, the entire idea of Trade Wars would have absolutely no relevance. But it does. In fact, growth in the levels of international Trade has been a driver of World Economic Growth as we pointed out in “Can Anyone Win a Trade War?” (https://markonomics101.com/2018/07/09/can-anyone-win-a-trade-war/).
The recent behavior of these key World Markets is yet another piece of corroboration that the Inflection Point we have been describing is nearing the end. It’s end marks the beginning of the “Tipping Point”, when the emerging theme overtakes the maturity theme. The benevolent direction of the warm tropical winds at our back suddenly shift to a frigid Arctic Gale in our faces.
A picture is worth a thousand words. These pictures are worth trillions.
Not only, is economic growth showing signs of tapering off, but recently two countries have had outbreaks of hyperinflation. Severe problems have surfaced among a number of smaller countries such as Venezuela and Argentina, whose currency is losing value at double digits rates per day. Argentina, had to raise interest rates to 60%, the highest in its history, in a vain attempt to ward off its own inevitable hyperinflation. It is applying for more bailout money from the International Monetary Fund. Iran, too is fighting the ravages of hyperinflation but the information is spotty (https://www.forbes.com/sites/mikepatton/2014/05/09/the-three-countries-with-the-highest-inflation/#2e7b3db1172e).
In recent years, Zimbabwe and Yugoslavia have suffered their own devastating effects as well as Turkey.
Worse yet, hyperinflation often creates civil unrest. In the case of the Weimer Republic, post-World War I in Germany, hyperinflation created the environment that made World War II inevitable.
The United States has managed to grow, albeit slowly, despite a world whose economy is slowing. Now that the US is dangerously close to experiencing its first BEAR Market in nearly a decade, those that fail to adjust will suffer tremendous consequences.
On the other hand, every disaster springs forth opportunities for those that know where to look and have patience. Keep coming back and we’ll help you find them.