Our new Quarterly Report issue is finally here!
Supposedly, no one would argue that an economy, especially a global one, is far too complex – far beyond anyone’s full comprehension. It resembles a bunch of gears with varying diameter and number of teeth, connected together in one enormous contraption. Meanwhile, the policymakers are the ones who take part in the mechanical reasoning test and turn the first wheel to guess direction and speed of the last one, the wheel of economic growth. The problem is that for the time being they seem to be unable to figure this one out. So once again, the conclusion is that we have to be patient and we will have to wait a little more.
There was an excessive amount of pessimism in our report last quarter, and to say the truth, it has not gotten noticeably better since then. It is a pity, but we had to reject a picture with a vast green valley and clear blue sky for the title page of this issue; instead, we decided go with the one you just saw. Everything seems to be crammed, everything seems to be blocking our view, and hardly anyone has a full grasp of the current situation, so it made a lot more sense.
It does appear that the United States are weathering the adverse environment successfully, but we have to admit that one country, however large in terms of economic output, will not be able to drag the whole world along with it. There has to be some positive reinforcement, and there is none. The potential engine of global recovery, China, is busy dealing with the stock rout and low business confidence, and it is highly unlikely to meet the expectations. Nobody seems to believe now the possibility of China bailing out the Eurozone, something that was very common in the news several years ago. It might be a bad habit to start the new year with this much gloom, but there is still no break in the clouds. And even if there is one, it might not last long, given how unstable the clouds are.
Do not get us wrong, it is not all black, but the there is little reason for optimism. Still, it is possible to find some positives in this, especially for traders, who depend not so much on the well-being of the economy, but are a lot more flexible in this regard. The unstoppable bearish trend in oil prices and slowdown in China create unique possibilities. Volatility is not only elevated at the moment, but new great opportunities now present themselves during the Asian trading hours, too. Use them well.
Trade thoughtfully and take care,
Dukascopy Research Team