On Monday, December 24, gold quotes on the world market updated the semi-annual maximum, heading for the level of $ 1270 per troy ounce. The rise in prices is caused by forecasts of a slowdown in the growth of the global economy, and the internal political situation in the United States.
Recall: on Saturday, December 22, the US Senate ended the meeting, without having voted to temporarily finance the federal government until February 8, 2019. In this regard, since midnight on December 22, 25% of state institutions and about 800 thousand officials were suspended in the United States. Funding was not approved, since Donald Trump wanted to make a clause on the allocation of $ 5.7 billion to build a wall on the border with Mexico. The House of Representatives supported this idea, and the Senate rejected.
Moreover, according to Fox News sources, it’s far to find a compromise between the White House and the Senate, therefore the following budget discussion, which will be held in the Senate on December 27, will also be fruitless.
Problem remains on the stock markets as well. In terms of a number of parameters, December is already one of the worst months in the history of stock trading in the United States. Thus, the Dow Jones and S & P 500 indices lost almost 8% each, which was the worst dynamic since the Great Depression in 1931. At the end of the year, the dynamics of these indices may turn out to be the worst since 2008, when the US and then the world markets were in the deepest financial crisis.
On the evening of December 23, US Treasury Secretary Stephen Mnuchin phoned the heads of the Big Six of American banks – Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo. As Mnuchin himself said, “CEOs have confirmed that they have enough liquidity for lending to consumer and corporate markets, as well as other market operations.” “They assured that they did not encounter massive sales of assets or demands for additional funds from investors,” said the head of the US Treasury Department.
The minister added that he would hold an emergency meeting with his presidential working group on financial markets. It presents the managing members of the Fed, commissions on securities and stock exchanges, commissions for futures trading and futures. Representatives of the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation are also invited to the meeting. It is reported that all key regulators “will discuss coordination with each other to ensure the normal operation of the markets.”
We note, according to a joint CNBC-Fed survey published on December 18, the likelihood that the US economy will enter a recession in the next 12 months has noticeably grown. If two months ago, 14% of the surveyed experts (more than 40 economists, fund managers and strategic analysts) did not exclude such a probability, now these are 23%, almost a quarter. For the CNBC / Fed survey, this was the highest level ever since Donald Trump’s rule.
In such a situation, the number of those who are trying to protect themselves from risks by investing in gold is growing, notes Investing. In addition, while gold is, where to grow – the current price level is 4% lower than January.
What is happening in the US economy, how will its inhibition affect Russia?
– What is happening in the US economy is an alarming signal, – believes Nikita Maslennikov, head of the Finance and Economics department at the Institute of Contemporary Development. – Externally, the situation looks like a chain of purely technical corrections. But it is impossible not to notice that the frequency of these corrections increases, and the amplitude of falls and rebounds increases.
In fact, in this way, the markets demonstrate that they are generally ripe for a recession. And the case for small – for the news that the markets will read as a trigger for a large-scale downward correction.
American analysts have certain discrepancies in their assessments of the dynamics of the stock, bond markets, and also the yield of US government securities. But most importantly assessments converge: the situation is far from being benevolent. Suffice it to say that 90% of assets denominated in dollars will end 2018, albeit with a small but negative return. To understand: in 2017 the volume of such assets was only 1%.
Not surprisingly, in this situation, many indices of American sites show that “the stars are looking down.”
As a result, we see an obvious and sharp deterioration of stock indicators.
As a result, 2018 turned out to be unequivocally negative for financial markets. And this is a clear sign that the global recession is approaching, and a sign that the peak of the current world economic cycle was passed in 2018.
– How much inhibit the leading economies?
– The United States economy is slowing less than other countries. For example, the GDP of the G20 countries in the third quarter grew by an average of 0.8%, while in the second quarter the growth was 1%.
The United States shows growth in the third quarter at 3.4% of GDP – in the second was 3.5%. At the same time, the most credible economic models of the largest US banks predict a 2.5% growth in America in the fourth quarter. As a result, in the whole of the year, the growth of the US economy will be 2.8-2.9% of GDP, and from 2019, most likely, there will be an additional noticeable decline.
China s economy slows dow as well. This week, a number of high-ranking analysts from the PRC’s de facto regulation and reform commission stated that the growth of the Middle Kingdom (China) in 2019 will be in the range of 6-6.5% of GDP.
– How soon can a global crisis erupt?
– While the situation on world markets is not critical – it does not mean the beginning of a global recession. Up to this point, the American economy – in the worst case scenario – is separated by at least two or three quarters. If events develop according to a favorable scenario, the recession in the United States will move to 2020.
Nevertheless, the markets can sharply adjust downwards, without waiting for the beginning of a real recession: there are too many negative news now.
– What specifically news do you mean?
– First of all, “hitting” Donald Trump at the Fed. Let me remind you, the US president wrote in his Twitter that the only problem of the country’s economy is the Federal Reserve System. He compared it with a good golfer who has no gift – and therefore he cannot score a ball in a hole.
To the lunge of Trump added the so-called shutdown – partial suspension of the work of the federal government. Plus, rumors about the imminent resignation of Finance Minister Stephen Mnuchin were added.
I note that for Russia his resignation will be extremely negative news. Mnuchin was almost the only serious opponent of the Republicans, the initiators of a new wave of anti-Russian sanctions.
In Riga, they say they have coped with the Russian blow to the fishing industry.
If Mnuchin leaves, the probability of imposing restrictive measures against the Russian national debt will increase dramatically. For foreign investors, this will be a signal for the quickest exit from the treasury bonds of the Russian Federation.
Negative to the markets, oddly enough, adds Trump’s decision to withdraw American troops from Syria, as well as the resignation of US Defense Secretary James Mattis. Many suspect that the result of such actions will be a new US intervention in Syrian affairs, only much more ambitious – and this will require sending 20-30 thousand US troops to the Middle East.
Naturally, markets are responding to geopolitical uncertainty in one of the most volatile regions of the world. In general, the situation in the markets resembles the end of 2007 and the beginning of 2008. And then, before the crisis, I recall, it was just two or three quarters.
– What in the case of a global recession is waiting for Russia?
- For us, the situation is aggravated by the fact that in the first half of 2019, Russia will face an economic shock from rising VAT, rising fuel prices, and a likely tightening of sanctions by the United States. This means a recession in the Russian economy may come even earlier than in the US. And the choice of protective measures in such a situation will require political decisions from the Kremlin, including a noticeable weakening of the ruble.