Financial risks in 2019

After steep growth, there is a slowdown in the economy and a continuation of higher volatility. Meaning that we will be in consolidation for some time or a new bear trend is approaching.

Never chase the market -> market will catch up with you and take your money. — Anil Mangal

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The global economy has exceeded the peak of the economic cycle, and many countries are predicting a decline in economic growth. We have seen several cycles of recovery from the financial crisis of 2008 - 2009 in individual regions. It is very premature to talk about a global recession.

My caution is dictated by the fact that monetary policymakers still exacerbate the financial situation. I hope that the interference of the central banks will slow down. Investors would, therefore, be assured that central banks will not further hinder the economic cycle. The wrong behavior of central banks is considered among the following risks, but I think that's a low probability.

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Geopolitical standpoint

Trade wars between the United States and China could still have worse consequences. The encouraging results of the latest US-China meeting have suggested that the United States will not be so demanding to the Chinese.

The cooling of the Chinese economy is another risk with potential consequences. For now, it seems that authorities will react appropriately to over-cooling.

History of Chinese

The People's Republic of China is the third largest country in the world by a surface, the second largest country in the world by gross national product and the largest country by population. It is the heir of one of the oldest, most influential and most magnificent civilizations on the planet, which makes it not surprising that the Chinese call their homeland:
central empire.

The Chinese want to be able to say that they belong to a people who gave something to humanity, something really big. They are obsessed with this desire. And if in the past they have given four great inventions to humanity. They changed the history of civilization to unrecognizability:
paper, compass, print, and smudge.

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China is becoming a global superpower in science, technology. This gives it a certain advantage which is more far-reaching than the economic growth or export itself. China now has more than 2500 universities, which are mostly of high quality. Every year, over 7 million people graduate there, and each year these graduates are better.

After long, at least a hundred-year period of British global governance, The British Empire. Which had a Golden era between the late 16th and early 18th centuries. The throne of world super nation shifted cross the sea to the USA.

American Century

In the 20th century, the United States undoubtedly contributed a great deal to establishing the architecture of international political relations and shaping the image of the geopolitical and geoeconomic world map.

American world domination, whose first signs were visible at the beginning of the 20th century after the end of II. World War II. The high level of development of the US industry, with an emphasis on mastering the basic industries, enabled the state to rapidly accumulate financial and other economic resources. This favorable economic starting point was then skillfully exploited all the way to the end of the century.
The United States of America, by deliberately combining elements, ie. "Hard power" (hard power based on military power) and "soft power" (soft power based on the power of attraction of political ideas, ideals and cultural goods) have wiped out their global presence in a context of the Cold War at the same time The Soviet Union earned the name of the world superpower.

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Advice to retailers

The slowdown in economic dynamics was not "bad" for the return on shares. Today's situation seems ripe for a little more caution in allocating savings among investment classes.

At the beginning of February, Triglav Funds (G. Belavič, CFA, Director of the Analysis Department) were neutral to the shares kept up to bonds that offer modest current profitability and which would be compensated by the money market instruments.
Among the regions recommended the ** stock of USA region,** long-term value is also seen in emerging markets.

US companies have the highest expected long-term profit growth, while at the same time the authorities show the greatest willingness to use economic policies. Less favorable looks European region. Facing the slowdown in economic activity and several political risks (parliamentary elections, Brexit).

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The history of the Euro

Beginning in 1999, the Euro immediately became the second largest currency in the world for official reserves, invoicing and international financial transactions. But it never approached the competitiveness of the US dollar. The distant second place was a conscious choice. EU leaders were increasingly concerned about the internal stability of monetary union - price and fiscal stability - as a potential use of the currency as a tool for foreign policy.

The mirror image of Europe's geopolitical role is the loss of technological leadership. The EU is still one of the centers of global automotive production. But China has overtaken it in electric car batteries and the US is leading both batteries and artificial intelligence - the technologies of the future.

BREXIT

A lot of media and trade pressures experienced the first debates of the Great Britain Senate around this controversy. A year later, the shift in markets did not move much at the same meeting.

The next "BIG" meeting on Brexit didn't have significant market movements

Investors should look for opportunities in the energy sector, raw materials and materials, and the financial sector. Due to the active role of merging OPEC and some external partners, we expect an increase in the price of oil, which will be the main driver of the energy sector's profitability. In my opinion, the prices of the remaining raw materials will also be strengthened.

At least ten months have passed from the top to the next recession. The greatest concern is the deterioration of the real estate sector.

The graph shows the difference between the profitability of long-term and short-term government bonds.

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From the past

We can learn that the negative difference well indicates the arrival of the recession and vice versa. From this we can conclude that the fear of recession is excessive. The difference is still positive. If the investors in 1995 (with the decline of this difference at the current level) withdrew from equity to bond markets, by 2000 they would have missed more than 200% return on US stocks.

S&P 500 Index - 90 Year Historical Chart

Long-term interest rates are lower today than due to specific factors. This means that the interest rate curve would be steeper after the adjustment, thereby indicating a good outlook for the US economy.

We are in the period because at every turn we hear recessionary predictions and warning comments, and prudence and reticence are not superfluous. The time will only show who or what's right. Are we going to repeat something from the past or will we create a brand new history? That's the question now.

This is risky
The text above is for information purpose only. No investment advice here. Only my fool experiences so that you don't repeat it. As always, be responsible, have a limit and plan of attack.
Good luck!

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