Are We on the Brink of a Global Recession?
Stock markets around the world are on the losing side of the economic game, and that could mean trouble in the very near future.
Since the China – US trade war started, the world has kept a finger on the pulse of the stock market which seems to be as juicy as cucumbers in North America. The recent tariffs placed by US President Trump Jr have shown a markable impact on world stock that signals a recession could come in the future. The decrease in stock prices does not forecast forecast the economy going up sh!t creek without a paddle but in some instances they might. The current USA – China war might also be one of those instances.
Based on the data, it is visible that stock prices are decreasing at a remarkable rate, due the sharp changes that have been introduced in how companies will be able to function in the future. Something interesting is the worries investors have about the increases in tariffs which will lead to costs going up and profits going down. Therefore, while stocks might be decreasing, companies do not guarantee a recession but the chances have increased significantly, specially after the stark changes have been made by President Trump. The chances had increased significantly pre election and during the Republican presidency.
A recession is defined by a period of two quarters where spending and exporting both decrease. The US has seen a record low spending where it only slightly decreased spending by 0.1% during the last quarter of last year, further devaluing the stock during February. The current month UK’s economy dropped around threefold with an average estimated GDP of 0.3%. Will see how well they spend after the mark gets hit.
Market Reactions and Economic Indicators
Now that the market is facing a further high and fully not sheltered spending, dramatic results can be observed.
As has often been the case in the past, the state of the health markets is always read in the context of the economy. According to an analyst, the decline in the stock price of banks is extremely concerning. Standard Chartered and HSBC are very important banks in East-West international trade. Both banks’ shares came down by more than 10% but later recovered marginally.
Moreover, there is also emerging evidence in the commodity markets. The prices of key commodities such as oil and copper, are known to reflect the state of the economy have fallen by more than 15% since the tariffs were announced.
Past Description Of Extremely Severe Worldwide Recessions
Severe worldwide recessions are highly uncommon. The synchronized decline in the economic activity of advanced economies is limited to the Great Depression of the 1930s, post the Great Financial Crisis and during the pandemic induced economic panic. This recurrent pattern, for the moment, any condition of this magnitude is unlikely. The chances of the US, UK, and the European Union recessing is even more certain according to many economists.
Looking at the macroeconomics side, Chancellor for the UK Rachel Reeves has, in a way, positive news, as the cost of government borrowing would fall by £5 to £6 billion each year because investors will likely shift to the relative safety of government bonds.
Nonetheless, this decrease will likely be overlooked by drops in government tax income if there is an economic downturn.
