Which sector look scary and which one promising?

One of the biggest questions being asked is which sectors will be growing in the next 5 years and where to focus now.  In the next 5  years, we will witness new sectors coming up that are now in the nascent stage of growth and limited to a few sectors, but will soon be one of the key GDP growth contributors in the coming years. As an investor and MFD, it is very important to know the fast-changing dynamics of the various industries across the globe and similar opportunities coming up in India. The Index might not have many of these industrial consumption stocks, but they will soon have higher weightage in the next 5 years. But what is changing, and how fast, is that the new sectors of industrial consumption are getting a hold of the GDP growth of different countries, shifting from consumer consumption. Why is global exposure in investments important, and where should you invest?

Global consumption is slowing down, but GDPs are growing. Looking at advanced economies recently, we see a pattern: higher energy costs, weaker labour-force growth, and declining savings constrain spending. From the U.S. to Europe to China, we find slow real-income growth and cautious households limiting demand.  For example, in China, soft household demand and declining fixed-asset investment are weighing on domestic activity, despite strong exports. With interest rates going up, the slowdown will be more visible. Trade uncertainty, geopolitical risks and weaker labour-market expectations tend to delay big-ticket purchases.

Be prepared to witness defaults in consumer loan products in different countries when interest rates go up. Job uncertainty and job losses will amplify the slowdown of retail consumption.  On the other hand, the Gen Z community across the globe is jobless, and they are dependent on their parents; furthermore, many have picked up household jobs for pocket money. This is scary, and focusing on retail consumption is a nightmare.

One of the key differences being witnessed in consumption patterns is that higher-income consumers and services spending remain more resilient; lower-income and goods-oriented consumption is under greater pressure. Job loss and changes in the dynamics of various industries due to AI and rising interest rates lead to a slowdown in retail consumption.

Businesses dependent on global discretionary goods are slowing down as job uncertainty, war-related price hikes and now the cherry on the cake of higher interest rates make things more difficult.

Europe faces a tougher setup because its growth momentum is already low, energy costs have increased, and household confidence is more fragile. The OECD expects euro-area GDP growth of only 1.0% in both 2026 and 2027. Surveys show rising job insecurity perceptions in places like the UK (highest since early 2023 in some measures), correlating with weaker appetite for major purchases and softer consumer sentiment. In the US, confidence has slid partly due to job and inflation worries, though high-income households (supported by wealth effects) have often kept aggregate spending from falling outright.

Among all these, how come the GDP of these countries are able to survive, and from where will these developed economies get growth?

Industrial consumption is driving GDP growth across the globe. For example, in China, technology manufacturing and exports support factories, but weak domestic consumption and property activity restrain broad industrial demand. The trade war has created a move toward independence in manufacturing, China+1” sourcing and regionalisation are attracting investment into electronics, autos, components, textiles and contract manufacturing in selected Asian economies.

The energy transition due to the war has created immense opportunity. Renewable equipment, grid investment, batteries, EV supply chains and critical minerals are creating incremental industrial demand.

 Industrial consumption in developing economies is growing rather than contracting, with emerging Asia clearly leading.

The mining industry is also driving significant industrial consumption. Saudi Arabia, UAE, Qatar, Russia, Australia, Indonesia, and many African & Latin American oil/mineral exporters (e.g., Guyana, Libya) now have a high level of mining activity and industrial demand.

China (world’s largest), Germany, South Korea, Japan, India, Vietnam, Mexico, and Indonesia are processing raw materials into finished goods (electronics, autos, chemicals, machinery, textiles, food processing, semiconductors). High multiplier effects (supply chains, tech upgrading, exports); often the biggest industrial contributor.

Industry (including construction) typically accounts for 15–25% of GDP (e.g., Germany ~23–25%, US ~18–19%, UK/France lower ~16–18%).

AI-related industrial consumption is a huge opportunity, and many countries are going ahead aggressively racing ahead. From real estate to capital goods, all sectors are going ahead to achieve huge growth in the coming years. Forecast to reach about $2.7 trillion in 2026, up ~49–50% from 2025 (Gartner). Infrastructure accounts for the majority (around $1.5 trillion, or more than half).  Data centre capital expenditure (capex)  is expected to be around $ 800 billion annually in 2026, rising toward $1.1 trillion by 2030 and $1.8 trillion by 2050. Cumulative global data center/AI infrastructure investment through 2050 is projected at $31.6 trillion in a central scenario.

Strong AI-driven demand is pushing the overall semiconductor market past $1 trillion in 2026, with data-centre chips and memory (especially HBM) seeing explosive growth. Wafer fab equipment sales are forecast to rise sharply (e.g., +24% in some 2026 projections).

So today it's clear that there is a significant shift happening aggressively. Global growth slowed in the first half of 2026, but has remained more resilient than expected because investment—especially in technology—has partly offset slower real-income growth and consumer spending.

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When India will match with Nato Numbers?

As geopolitical tensions rise and global security dynamics evolve, NATO is preparing to take a historic leap in defence preparedness. Ahead of its upcoming summit, alliance members are aligning on a bold new target: allocating 5% of their Gross Domestic Product (GDP) towards defence and security by 2035. This marks a significant shift from the current 2% commitment, reflecting the urgency to modernise forces, bolster deterrence, and address emerging threats in a rapidly changing world.

 1. Largest Additional Military Outlays Needed (in USD):

•  USA: $503 billion more annually (current spend already at 3.3% of GDP)
• Germany: +$135 billion
• France: +$89 billion
• Italy: +$80 billion
• Spain: +$60 billion

These five economies would need to substantially increase their military budgets to meet the 5% goal.

2. High Debt Vulnerabilities:

• Countries like Italy (135%), Greece (154%), France (113%), Spain (102%), and Belgium (105%) already have debt-to-GDP ratios above 100%.
• Increased military spending could strain public finances, escalate borrowing costs, and potentially trigger austerity trade-offs in social sectors.

3. Low-Debt, High-Gap Nations:

• Even fiscally healthier countries (e.g., Sweden, Denmark, Norway) would require significant relative increases in military spending — around $10–20 billion extra annually — despite having lower debt levels (~30–40%).

4. Who’s Almost There?

• Poland is closest, already spending 4.1% of GDP; it would need only $7.7 billion more, relatively modest compared to others.

NATO’s new 5% GDP defence spending target by 2035 is significantly higher than India’s current 1.9%.  2025-26 Defence Budget: India's Ministry of Defence (MoD) has allocated ₹6.81 lakh crore (approximately $78.7 billion) for the fiscal year 2025-26, marking a 9.53% increase from the previous year's ₹6.22 lakh crore ($74.3 billion). This makes India the fourth-largest military spender globally, behind the US, China, and Russia

Key Focus Areas:

• Modernisation: Investments in drones, air defence systems, tanks, fighter aircraft, helicopters, and naval capabilities (e.g., submarines, aircraft carriers).

• Self-Reliance (Aatmanirbhar Bharat): 75% of the modernisation budget supports domestic industries, reducing reliance on imports.

• Border Infrastructure: ₹7,146.50 crore allocated to the Border Roads Organisation, up 9.74% from 2024-25, to counter China along the Line of Actual Control (LAC).

 

💡 Strategic and Economic Implications:

🔸 Political Challenges:

• Governments will face domestic resistance in reallocating funds from welfare, healthcare, or education to defense.
• Rising debt may force tax hikes or budget cuts elsewhere.

🔸 Defense Industrial Surge:

• A long-term shift toward 5% GDP spending could supercharge the defence sector across NATO — boosting jobs, R&D, and manufacturing.

🔸 Economic Risk Management:

• Countries like Italy, Spain, and France may need gradual ramp-ups or EU fiscal coordination mechanisms to absorb the shock.

 

✍️ Conclusion:

To match NATO’s goal, India would need to allocate around $250 billion annually by 2035 (assuming a $5 trillion GDP), a five-fold increase from current levels. This is unlikely without massive economic growth or reallocation from other sectors.  India’s focus remains on balancing modernisation with self-reliance, prioritising domestic procurement over import-heavy budgets like some NATO members

 The NATO-wide 5% GDP military spending target marks a strategic pivot — but it could also become a fiscal stress test, especially for debt-heavy European economies. Countries will need a balanced roadmap that combines defence ambition with fiscal prudence, likely involving multi-year planning, phased commitments, and innovative financing.

Moreover, defence spending is not just a matter of financial allocation—it demands effective planning, execution capacity, and industrial readiness. The potential surge in budgets must be matched by a parallel expansion of defence manufacturing capabilities, innovation in military technology, and modernisation of command structures. Without this, higher spending could risk inefficiencies and misallocations.

This strategic pivot, therefore, calls for a multi-dimensional approach: a phased and flexible implementation timeline, transparent national defence roadmaps, collaborative EU-NATO coordination mechanisms, and public engagement to build consensus. NATO must also recognise that not all member states share the same fiscal capacity or threat perception, and one-size-fits-all targets may require tailored commitments and burden-sharing models.

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What more you should expect and Be ready from Trade War Series 1

This is a deep and multifaceted scenario, being outlined essentially as a geoeconomic war masked as policy moves, with strategic shifts in diplomacy, trade, monetary policy, and even tourism.  At the end of January, foreign countries owned $1.32 trillion worth of U.S. mortgage-backed securities, or 15% of the total outstanding. Trump wants the stock market to collapse, as he wants the stocks to be cheap and to encourage more retail participation in the coming days from his people. He wants interest rates to decrease so that the cost of borrowing returns to 2020 levels.

This is the 3^rd world war and not a trade war now. It will create less trust among the developing countries.  Now only the supply chain but also political ties will change dramatically, creating another economy of super power.

But in between, we need to know how different countries are placing their bets to create more issues and problems as retaliation against the U.S and also how it will impact the global economy.

Let's break it down into several key dimensions to fully grasp how it might impact the global landscape:

 Strategic Pivot from China: Building an Asian Bloc

• Xi’s diplomacy with India, Japan, and South Korea: This is a move to counterbalance U.S. encirclement and decouple from Western-dominated economic dependency. A regional bloc could lead to:
• New trade pacts and investment corridors, reducing dollar reliance.
• Supply chain localization in Asia, which undercuts U.S.-centered logistics.
• A push toward alternative reserve assets, possibly yuan-denominated.

 The Weaponization of Financial Markets

• China dumping U.S. MBS and Treasuries: A potential retaliation with wide-reaching consequences:

·        If China wanted to hit us hard, they could unload Treasuries. Is that a threat? Sure, it is.        At the end of January, foreign countries owned $1.32 trillion worth of U.S. MBS, or 15% of the total outstanding

·        China had already begun selling off some U.S. MBS last year, with the country’s holdings at the end of September down 8.7% year over year and down 20% by the start of December. Japan, which had shown gains in its MBS in September, showed a drop at the start of December.

·        The $29-trillion Treasury market had surged in recent weeks as investors dumped stocks for the safety of government bonds in a tariff-fueled risk-off shift.

• Yields on U.S. Treasuries could spike, pushing borrowing costs higher.
• Could create liquidity crunches if confidence in U.S. debt instruments wanes.
• This is a soft nudge toward destabilizing U.S. monetary hegemony without a direct military response.

 Economic Retaliation — But at What Cost?

• 104% tariffs are more than a pressure tactic—they're an economic nuclear option. They're likely to:
• Lead to supply chain cost explosions in electronics, EVs, batteries, etc.
• Cause inflationary pressure domestically as imports become expensive.
• Drive interest rate confusion—the Fed wants to cut, but tariffs could keep inflation sticky.

 Tourism Collapse & Soft Power Erosion

• A loss of $64 billion in tourism is not just economic—it signals a cultural and diplomatic breakdown.
• Visa difficulties and travel warnings from allies like Germany, the UK, Netherlands show reputational damage.
• This could also impact student inflow, innovation pipelines, and talent mobility, eroding U.S. soft power.

The New Global Alignment: Emerging Players & Alternate Economies

This could set the stage for:

• BRICS expansion or the birth of a new Eastern bloc financial system.
• Rise of commodity-backed currencies or regional trade ledgers.
• Major shift in energy alliances, with oil/gas trade moving away from the petrodollar framework.

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You are Absolutely Right on U. S Tariff

You are right that the  U.S. imposing a 26% tariff on India, as part of a broader wave of unprecedented tariffs, could signal a slow but seismic shift in global trade dynamics. The move, framed as a "reciprocal" response to India's 52% tariffs on American goods, reflects a U.S. push to prioritise domestic economic protection over decades of trade liberalization. It’s a bold play—rooted in the idea that the U.S. market’s sheer size gives it leverage to force others to adjust—but it’s not without ripple effects. Soon, many economies will come up with stimulus capital to support domestic business and new bilateral trade deals within emerging economies, and smaller ones will come together. Shared pain creates incentive: if the U.S. is playing hardball, why not pool resources and markets? Together, they could counterbalance U.S. leverage, diversify trade, and reduce exposure to a single power’s whims. The math checks out—emerging markets collectively account for over 40% of global GDP and are growing. Unity could amplify their voice.

 Export-driven economies like India, where the U.S. is the largest trade partner, will feel immediate pressure. Sectors like pharmaceuticals, textiles, and jewelry, which make up a chunk of India’s $66 billion in annual exports to the U.S., could see margins shrink or market share erode if costs rise too sharply. India might retaliate or accelerate trade talks to mitigate the damage, but either way, it’s a wake-up call to diversify away from U.S. reliance.

Your point about the dollar is intriguing. Tariffs this aggressive could nudge countries to explore alternatives—think regional trade blocs, bilateral deals in local currencies, or even a gradual pivot to platforms like China’s yuan-based systems. It won’t happen overnight; the dollar’s dominance is entrenched by habit and infrastructure. But cracks form slowly. If nations start doubting the U.S. as a stable trade partner, they’ll hedge their bets.

The game’s rules are indeed shifting. Investors with an eye on the long arc might look at supply chain reconfigurations—companies moving production out of tariff-hit zones—or currencies and assets less tied to U.S. policy swings. Big changes don’t shout; they creep. This tariff move, announced just yesterday on April 2, 2025, might be one of those quiet first steps.

Export-heavy nations—India, China, the EU, anyone in the tariff crosshairs—face the first hit. For India, with $66 billion in annual exports to the U.S., a 26% tariff could slash competitiveness in key sectors like pharmaceuticals, textiles, and tech services. Prices rise, demand dips, or firms eat the cost, shrinking margins. Retaliation’s likely—India’s already got 52% tariffs on some U.S. goods, and this could escalate, dragging both sides into a tit-for-tat spiral. Global supply chains, already fragile post-pandemic, take another blow as companies scramble to reroute production or absorb costs. Think higher prices for consumers everywhere, especially in the U.S., where imported goods from tariffed nations get pricier fast.

Trade volumes could contract. The IMF’s already warning of a 2025 growth dip—say, 0.5% globally—if tariffs broaden. Stock markets might jitter, with export-reliant firms (e.g., Indian pharma giants or German automakers) seeing sell-offs. Currency volatility kicks in too—India’s rupee, for instance, might weaken as export dollars dry up, while the U.S. dollar could strengthen short-term from safe-haven flows.

Long-Term Impact

Here’s where it gets structural. Blanket tariffs signal that the U.S. is doubling down on economic nationalism, potentially unraveling decades of globalization. Countries like India might fast-track deals elsewhere—think RCEP or deeper EU ties—reducing U.S. market clout over time. Supply chains could fragment into regional hubs: Asia for Asia, Europe for Europe, Americas for Americas. Efficiency drops, but resilience rises against U.S. policy swings.

Your earlier point about the dollar nails it. This could accelerate de-dollarization. Not tomorrow, but in a decade, if nations hoard less U.S. debt or settle trades in yuan, euro, or even digital currencies. The U.S. risks losing some of its "exorbitant privilege"—cheap borrowing and global financial sway. Meanwhile, developing economies might stagnate if trade barriers choke their export-led growth, widening inequality with richer nations.

Winners and Losers

Emerging countries are a messy bunch—India and China clash over borders, Brazil’s got its own agenda, and Africa’s fragmented. Trust is thin; many compete in the same export spaces (textiles, manufacturing). Aligning policies takes time, and the U.S. might dangle carrots—trade deals, aid—to peel off waverers. Plus, their domestic markets often can’t absorb what the U.S. buys. India’s middle class isn’t yet big enough to replace American demand.

The global economy won’t collapse, but it’ll adapt, painfully. Growth might hover lower—say, 2-3% annually instead of 3-4%—as trade frictions mount. Smart players will watch for shifts in trade flows, currency power, and regional alliances. It’s less a crash than a slow reordering of the board.

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A shift is coming in Investing and towards the value of Money

The biggest difficulty of this current market is that a year ago you went to the client and asked for Rs 25 lakhs for investment showing performance and the client gave you Rs 50 lakhs instead. The last 6 months have given significant knowledge to the investors that rebalancing and realignment are two critical components of investing. In my interactions with MFDs, I have found that many of them failed to convince the clients about the fall of the market, keeping the current investments intact and at the same time guiding the clients to rebalance when the market was high in 2024 September.  

It was a surprised when we met many industry veterans and learned that there was no pressure on their faces from the client end related to the market correction, whereas, at the same time, there was another group of MFDs struggling to face clients.

The biggest question is what got wrong and where? Well, the last 4 years' rallies attracted investors to the market and new financial advisors who joined the market based on the rally of the equity market. Now managing clients when one is under a job in another firm and getting converted into MFD are two different aspects.

This has been one of the grey areas where the gap between clients and MFDs has widened. Further, the new MFDSs and those who had Rs 5cr to 10cr AUM in 2019-2020 sold only performance. It’s a bitter truth but when performance is being sold alone then redemption without notice to MFDs is bound to come.

The communication gap widened more due to this performance-based product sale. Past performance made the work easier to garner AUM. Now coming days and years will be different from the client's perspective and from the investment climate. As an investor, the responsibilities towards the investments and investing are now very high. Investors' basic awareness of investing is now an old subject.

Money in the bank isn’t safe. The moment you deposit your money in the bank, you don't truly own it. Your future self is getting poorer by 11% each year due to currency debasement. Houses are no longer a path to wealth. In the past, homes were affordable and provided financial security. Now, they’re “lifestyle banks” not wealth creators. Inflation control is just a gimmick since the climate chapter and syllabus are on no one's list.  Purchasing power will come down and vice versa savings and investing.  Opportunities where small investments can lead to massive returns. Yes, this is a theory that will prove more in the coming days.  On average, your purchasing power declines by 8% yearly. We are not getting this realization that we are becoming poorer

As you read any book on productivity asking for deep focus- similarly for investing and to remain invested you need deep focus. The voice of distraction will be more and hence as an investor you need to be educated and aware of such distractions.  As an investor you now have to pass exams and also MFDs need to come up with exams for getting the clients qualified to be a client of you. Yes, the coming times demand behavioural analysis of investors and repetitive analysis of the same and not a one-time affair.  The generation of 2000’s birth and post don’t know much about GFC and other stuff and hence education on the history is more important rather than performance-based product sales. Clients' deep focus towards financial objectives needs to be tested yearly to gauge the influence of distractions.  In short, a seismic shift is coming and money and investing will change forever.  Be ready now or get ready in time.

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Market-Journey from Cheap to Most Cheapest and yet to Go

Every investor is under tow question 1) is this the right time to buy as stocks are cheap and 2) when the markets will be back to an all-time high. Markets and its levels are unpredictable. I heard a lot of fund managers and concall and all of them said it is cheap to invest and the best time to build long term portfolio. 

  My point of analysis being an economist and business strategist is we need to look beyond the Covid 19. Yes, when we look beyond we get ready for choppy and more uncertain things. The article is divided on economic and market hence one will get a gamut idea about the outlook.

In the below analysis I find that we are back to 2008 and another decade of revving and building the world economy has come up. It might look easy but I am very much sorry to say it will be tougher since major weapons have already been fired.

Today I don’t have much analysis to do but hold many questions bubbling in mind and the question are raised to all of you. LOCKDOWN and GDP are both linked to each other. The covid 19 impacts on global GDP is going to create a new history of Economic Slowdown which might break the record of several 1929. The history of recession will be rewritten and the major problem is that the global economy has lost all its mass weapon of injecting liquidity. Now the last resort of direct transfer of money has come into place. The problem is not for working from home but for all those people who are Day Wage Earners doing no skilled work or don’t have the work which belongs to the category of the Work from Home.

My 1st point is that it is now well clear that 1st Quarter if CY02020 is gone with slow down but it seems that 2nd Quarter will be gone. The lockdown during this time will make living difficult for the unskilled jobholders. Well how long the World leader will keep transferring money directly to these accounts? If the lockdown continues for full of April and then spill over to May 2020 then how much billion or trillion will be required to transfer directly?

Question 1

The immediate question which comes in mind is why Lockdown will continue till April and May. This data itself will speak more why the lockdown will continue. This same data will spook the thought of how much lockdown is required. As per the World Health Organization notes that while it required three months to reach 100,000 cases, it took only 12 days to hit another 100,000.

During this crisis when there is zero revenue and business is in doldrums and people will not be having any money to buy things. Income inequality will grow and people will be saving more to save for any unforeseen event. This particular phase will create a ripple effect on the global economy. EU as a whole has been in doldrums since 2008 and its austerity measures crippled the economic growth

.

Question 2

Now with massive stimulus coming out from the pockets of the EU do we think that in the coming years EU will be struggling more and more austerity measures will be coming up? How the citizens of the EU are prepared for the same. How many countries will be joining in the default category in the coming years just like Greece and Athens came up in the last decade?

Question 3

Corporate Debt will grow since zero interest rate is something different and repayment of debt is something different. If every central bank and government will be giving so much liquidity then the next question comes from where they will earn to balance the CAD and Fiscal condition. The corporate bond market will be witnessing nightmare once the dust settles. We have to build a business and we have to get trade back on track. The global economy cannot afford to have another Trade war and cannot afford to have Big Banks to fail.

We must not forget that Individual workers and their families — many only recently recovered from the economic cataclysm of 2008 and 2009 are already feeling the effects. The unexpected economic shock has put millions of Americans living on the precipice of ruin. In a Fed survey last year, 39% of Americans said they would be unable to handle an unexpected $400 expense. The recovery was just in the process before the bell rang for the collapse.

Coming back to investment and yes to my home country India everyone is looking for a cheaper price avaliable. The concept of cheap needs clarification. As I said earlier that What seems cheap today is cheaper tomorrow and cheapest on the next day. This is what will happen and will continue. Believing on this statement what many investors did that when markets came down to below 10000 they invested and when it came below 9000 they invested and when 8000 was broken they invested the rest. So the journey of cheap to cheapest is covered but now IF it will fall below 7500 then what will that investor do? Stay Long term the blindest statement for an investor who deployed all his savings to make quick gain based on the statement of the cheap offer available in the market. Deep Discount Like Flipkart, Amazon were some of the statement circulated and said by every market player. These idiots forgot that they are comparing investments with physical assets.

Question 4

 The way the global markets have fallen any investor –particularly international investor will be looking for US or EU market to invest and then will turn towards Indian or Emerging markets. Secondly, they need money at home during this crisis and we all don’t know how long the capital will be required and what further cost or expenses will arise in their own home country. Hence international investors investment is waiting and watches mode. Now in this context what is the definition of Cheap? What should I be mentally ready if I Invest? What Should I Expect?

The irony of life is that now Indian markets will attract 1st-time investors who are another set of blind people who hardly knows anything about investment. I have personally come across people who don’t know the difference of Demat account and trading account. These people will now burn their fingers taking a call on cheap and cheapest. Continued to Part 2.

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Corona virus the Driver of a global slowdown

 Well, the Global GDP is now bound to get slow and more importantly the cost of things will start increasing. This coronavirus is not an epidemic but a pandemic. The disease is multiplying faster as per the data. Trade and business both are going to be impacted and this will pull down the Global GDP in this quarter. The problem is more critical for those countries where the infrastructure facility is poor. This is a major grey area which needs attention for providing the facility. Travel is already getting banned and all mode of travel communication are closed for the time being as the speed of the disease takes its speed. The spread of the disease is so strong that China has advised that the bodies of those who have died from the coronavirus should be cremated immediately and that there should be no funerals.

Food inflation is another trigger which will simultaneously be going to chase the global economy creating disruption particularly for the developing economies and poor ones.

The spread of the disease is much faster and creating an immense impact on human life. The disease has now spread in many countries. Below is the list of the countries which are impacted till now with the number of candidates infected in every country:

1. Australia - 12

2. Cambodia - 1

3. Canada - 4

4. Finland - 1 

5. France - 6

6. Germany - 8

7. India - 2

8. Italy - 2 

9. Japan - 20

10. Malaysia - 8

11. Nepal - 1

12. The Philippines - 2

13. Singapore - 18

14. South Korea - 15

15. Spain - 1

16. Sweden - 1

17. Taiwan - 10

18. Thailand - 19

19. United Arab Emirates - 5

20. United Kingdom - 2

21. United States - 11

22. Vietnam - 8

In China, at least 361 people have died, the government said on Monday. At least 17,205 people have been infected across the country. The U.S. declared a public health emergency. The pandemic concept is that an epidemic of disease that has spread across a large region; for instance multiple continents, or even worldwide. The diseases are spreading from person to person and the most dangerous thing is that even the infected one did not show any symptoms but it infected the other one. This has come up in Germany last month.

Tourism followed with ancillary industries is already impacted. Three major airlines — United, American and Delta — announced today that they were cancelling all flights to China. Very soon import of goods and food items will be stopped from china which will create inflation of food items in certain categories. Jordan has already halted animal, plant products imports from China over Coronavirus.

China GDP numbers and other macro numbers will be low without any doubt. Fourteen provinces and cities have said businesses need not start operations until at least the second week of February. All the key cities which are also manufacturing provinces have extended to remain shut down. They include Guangdong, home to the tech city of Shenzhen across the border from Hong Kong; Shanghai, home to China’s largest port and a newly-built Tesla Inc. plant; as well as Jiangsu, where Nike shoes are manufactured. Henan in central China, which has a large Foxconn plant making iPhones, also announced the extended break.

Now the biggest risk to mankind is that many countries are closing doors for entry into their country from China. They don’t want them back to their country currently. New Zealand, Indonesia, Iraq etc are now walking on the path of closing doors so as not to let infected people enter their country.

Getting medical resources in place is the biggest challenge for the time being. The weak infrastructure based country is more cautious under the threat. The global shut down will cost billion if the disease spreads and kills more people.

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Lack of Leaders for the Upcoming Recession if ANY

After a decade from the 2008 recession, the only difference in the global economy is lack of leadership within the political parties across the globe and this keeps me awake in the night. From the US to the UK every country has a political risk and mass protest has become a routine affair.  

 Leadership is at risk in every country now. Instability has become a nightmare. The piling up of debt seems to be never-ending the story now and it has already become a balloon. Emerging economies are going to be the worst hit but more than that I fear about the lack of leadership to manage and handle the same. The 2008 recession was faced and managed by a hard group of leaders from all segments across the globe. Do we really have them now?

The global debt has swelled up and the way trade war is going ahead if a recession comes in no government or political party will have the ammunition save the global economy.

The trade war is reducing interest rates and taxes to support growth. In simple words, growth is being pushed by lower income for the Government across the globe. Corporate debts are swelling up to face the heat of trade war and this is the place of intense risk for the global economy.

A country like china who is the prime target of Trade war has got a swollen up Debt pile. Chinese firms accounted for 42% of all corporate bonds issued in EMs this year The combined debts of 30 large Developing Economies rose to 216.4% of GDP in March, from 212.4% a year earlier, sending it to $69.1 trillion in dollar terms.  Chinese firms accounted for 42% of all corporate bonds issued in EMs this year.

Margins are falling and revenues have already plummeted. Corporate debt obligations are becoming a nightmare currently. Global Debt Hits $246 Trillion, 320% Of GDP, As Developing Debt Hits All-Time High.

1.      Debt by sector, Q1 2019 (as % of GDP):

2.      Households: 59.8%

3.      Non-financial corporates: 91.4%

4.      Gov't: 87.2%

5.      Financial corporates: 80.8%

Collateralised Debt game has been played extensively by all the banks. The list as follows:

Key Players in this Collateralized Debt Obligation market are:–

• Citigroup                                                                           
• Credit Suisse
• Morgan Stanley
• J.P. Morgan
• Wells Fargo
• Bank of America
• BNP Paribas
• Natixis
• Goldman Sachs
• GreensLedge
• Deutsche Bank
• Barclays
• Jefferies
• MUFG
• RBC Capital
• UBS

US economy is entering into an election phase and without any election, it is well clear that Mr Donald Trump will be the President.  So the trade war and debt pile up story and lower interest rates will keep playing its game since Mr. Trump is backed by the US capitalist to create a bubble of the explosion.

He is strongly supported by capitalist and business-centric minds. Those who will propose taxing the super-rich and going for tax cuts for the middle class and lower-earning group of people there will be a significant risk for those politicians to ruin their political life. The vote will go to the ones who will support in making the super-rich to become richer and making wealth transfer tax free and further making consumer suffer from more consumption cost.

The economic numbers will be cooked to portray a robust economic growth but in real terms, it has weakened the fundamental of the US economy post-recession. If a recession comes I find the biggest threat which the global economy faces is the lack of leadership to control and manage the US  has filled up the pockets of the corporate US by lowering taxes and negligible investments in the economy. Buyback of shares stood at $800 billion. Corporations were spending too much of their free cash flow. 

This means that the benefits of the Tax cut and low-interest rates benefit are not passing into investing assets to create long term economic growth. 

The growing debt and falling revenues and growth are going to end at one point and that point is going to be the beginning of Recession.

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Low savings rate …Borrowed Consumption Driven GDP Growth

We read everywhere that when macroeconomic data related consumption picks up we find Christmas type of celebration happening and hence the market concludes that economic growth is picking up. The market reads this data with huge confidence that people and economy are all in safety zones and the long-term prosperity of the economy is intact and the boom phase of the consumption should be taken for granted and this leads to expansion of business and trade. Consumption of borrowed capital is the old economic theory which leads to death in the long term. Reducing savings and taking up more debt has been one of the prime things which have been ruling across the globe. Savings the word might be heard or read less nowadays since consumption is all about economic growth despite a nation’s savings coming down to zero.

Keynesians economics principles were that consumption was the mother of sustainable economic growth but unfortunately we have burnt our fingers in 2008 with leveraged death. Inequality has been ignored at all aspect and we are paying the cost for the same. Over-leveraged export, dumping of goods and widening inequality have been a theme for the past decade. Now with the doors of globalization getting closed leads to a huge problem for this leveraged death.  Exporting countries particularly the ones who are dumping goods are now focusing on domestic consumption market but unfortunately, that market is also over-leveraged and the statistical data of savings rates speaks enough for the same where consumption growth is expected to be limited. The other side of the coin is inequality where proper penetration of the latest technology or even financial growth related seeds has not been planted. That data speaks about the inequality.  The data of both the low savings rates followed with Inequality levels. Interpretation of the Inequality data is that 1 means complete inequality.  

In my research I didn’t go into countrywide debt to GDP since in that data will not give a picture of the true savings rates country wise. The reason being that every country has da ifferent process of calculating there GDP to savings. For example, prior to the financial crisis, households’ “perceived wealth” increased due to inflated real estate values – the inflated values of their homes added to their perception that they were, in fact, wealthy – and the (perceived) need for savings shrank. 

The domestic consumption is not enough to support these economies since they are having low savings rates and high level of debt. The only grew are which one gets is the bridging the inequality and designing the products and pricing accordingly. Loan growth is being taken as a symbol of strong economic growth and disbursement of credit.

Household savings plays a vital role when the economic slowdown hits the road. The economy gets a major boost up when the household savings of a country is stable and strong enough to wither any slowdown. Low savings creates burden indirectly on the government where they have to bailout many segments of the society. Common people have no other option but to lookout for govt support and hence society gets into massive inequality.

We often hear that many countries corporate are sitting on cash levels and they are not investing. Well the reason being that cash is king in these economic volatile rides and hence we cannot take a plunge. Consumption based GDP growth has lead to an devastation where any dip in any economic growth will be detrimental to the economy itself due to poor savings rate. Loan based economic growth cannot be sustainable. China might be working on the same lines but that is not going to get the growth sustainable. All the QE are now getting winded up followed with interest rates being increased.  

The zero interest rates days are now over and hence the payback cost of the borrowed capital is now being felt across the global market.  Consumers who have enjoyed zero interest rate regimes are now finding the situation to be difficult and this burden will amplify.  Debt is now a serious problem for the economy as well for the consumers.  The only solution to the global economy would be fa ocus and a strategy polices to bridge the inequality gaps and move ahead accordingly.

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GLOBAL ECONOMIC SLOWDOWN IN H2 2018....

2018 H2 seems to be a tough time for the global economy. Slowdown seeds have been sown and the fruits are getting ready. Europe is completely into the doldrums. Brexit battle followed with Italy having a very inexperienced government followed with Germany struggling with its own government stability has just amplified the economic slowdown. Angela Merkel’s coalition partners – the Christian Social Union (CSU) is creating an immense problem for her stability. We have Donald Trump as topping over the ice of slowdown where his trade policies irrespective of what percentage of they contribute to his economy is already affecting productions of other countries. Germany is under very much under the nightmare of losing its most valuable market US.

China is under immense slowdown and it is busy is saving the global and Asian economy form another major recession.  Shadow banking ghost is being now slaughtered by the Chinese monetary and government therapist. Their economy is now under immense pressure externally as well as internally.  Bond issuance cancellation by China has grown significantly, April-47 billion yuan and in March 47.4 Billion. The combined debt of China which includes borrowing via loans and bond issuance is 13.2 trillion Yuan which is US$2.1 trillion as of March 2018. Please don’t compare the debt with other economies since every economy has its own macro dynamics ruling the same.

Investment in China has taken a massive blow and almost low to the 1990 levels. This means consumer segment will face slow down and manufacturing has already taken a setback. Banks are reluctant to fund and business loans have dried up. Cleaning the books of China was a good idea but Donald has turned that into a nightmare with its trade war and restriction of Chinese companies taking up stake and investments in the US. IPR has become a big threat and copy based economic growth of China now seems to be a difficult game.  Chinese companies shave to pay 2.7 trillion yuan of bonds and in the offshore segment during 2^nd half of FY-18 they have to pay another 3.3 trllion yuan of trust product sets which are about to mature in the second half of the calendar year 2018. The global currency will be under immense threat of volatility. The corporate debt to GDP of China is 167% which is significant threat currently after Donald trump trade war. Always remember when manufacturing happen flow of capital keeps moving but when goods start getting dumped at ones warehouse things becomes difficult. China is focusing on de-leveraging the economy and that will come at a huge cost for the economy. Chinese banks are also under pressure of holding around 4.1 trillion yuan of bonds and govt is chasing the banks to offload and reduce the exposure. Shadow banking is under elimination but it will come at a cost for the Asian economy since the slowdown in China will affect other major economies too.

Brexit has created a threat for the other countries as the difference of opinion and unity of EU is broken which is a big threat for EU as a whole. Russia and U.S both are keen to exploit and find resources to turn things and rule within the EU economy. EU is broken and the pain is being heard very lightly currently as all focus is on the Donald Trumph trade war.

Trade war and protection policies will spook inflation and also slow down investments which leads to cut down on consumption pattern on the global landscape.  Commodity prices are already increasing and trade barriers would create massive volatility of the prices which will erode the profits. Zero interest rates days are over and whatever wage the US citizens got are on the way of depletion as higher borrowing cost eats up.  Global interest rates are scaling up and fragile manufacturing and trade outlook leads consumers to be on the sidelines.

The trust factor and no proper outlook of the different economies keep investors under immense pressure. Scaling up of interest rate spooks liquidation of risky assets and flight towards safer assets. 2018 end and beginning of 2019 would be massive slowdown phase keeping the global economic scenario in mind as developed currently. Asian bond market will need soon support as trillion of bonds are about to mature and repayment is tough game. The irony of bond issuance have been that bond buyers dont know what type of complex hybrid bonds have been issued.  Well very soon the world will come to know once the default happens.

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