About a year ago I mentioned the likelihood that China China
My contention is that the market will continue correcting the government's over-inflated value until it gets it right. Unfortunately, China has far reaching connections that effect governments around the world. The US is the biggest player and yet will feel it the least; but even the US has seen some dreadful dips in the market lately.
The US business community has been very astute into methods to combat competing forces. The oil industry is an example of an industry successful in securing oil independence. However, with that success the Middle East has been forced to flood the market with cheap oil (and lower prices) in hopes of ruining the newer fledgling U.S. oil corporations.
Another complication for oil companies is the lifting of sanctions from Iran, which may reduce oil prices even further. Europe, on the other had, actually welcomes the lifting of Iran's sanctions. They now have a new market with which to trade and hopes of reinvigorating their lagging economic conditions.
But back to China. If it's market slides further, it will continue to put a drag on the recovery of many other economies of the world.
Dr Larry Summers seems to have quoted an accurate condition of the global economy during an economic policy conference, when he said. "We are flying at close to stall speed."
Trouble spots:
1) US politics. I believe it will have a dramatic effect on the direction the US moves. The elections will decide whether there is a wide shift to strong socialistic policies or back to conservationism. either direction will have consequences that can be discussed at another time.
2) China's buying is coming to a halt, and with it global real-estate will suffer. China has purchased $22 billion of real-estate in English speaking cities like Sydney, Singapore, L.A, San Francisco, New York, Vancouver, and London. This accounts for 24% of the international real estate purchases. It doesn't help that China's aging population is hurt by the previous one child policy, shrinking its labor force, and further slowing it's economic growth.
3) Middle-east unrest (ISIS in particular) will continue be a sore spot in the world economy. War always causes uncertainty where there are monetary concerns. Geopolitical tensions disrupt financial transactions, global trade, and tourism. If political resolutions occur, growth could be substantial; nevertheless, this area is so unpredictable, it is almost impossible to determine an outcome until at least the end of the year.
I don't want to end with a sour note. Although China is going through a recent upheaval, Brazil in a recession, and Europe at the mercy of migration complications, it doesn't mean the end of the world. I expect most countries' trade and commodities will suffer in the first part of 2016. In the end, the U.S. is still the best game in town. So if we are economically pragmatic and optimistic, I expect the world markets will follow.
http://www.imf.org/external/pubs/ft/weo/2016/update/01/
http://www.afr.com/news/economy/global-economy-is-in-serious-trouble-larry-summers-20151021-gkf7w9
http://www.economist.com/news/finance-and-economics/21685484-politics-making-international-co-operation-harder-loathe-thy-neighbour?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
http://www.theatlantic.com/china/archive/2013/11/six-consequences-of-one-child-policy-reform/281539/
