I was recently quoted in an article by Stephen Pounds of Bankrate.com which shed light on some economic “trouble spots” around the globe. The article, “Top 7 ways the global economy can affect you,” captured only a brief bit of our thinking. We wanted to offer Ramparts readers a couple more of our ideas on topics of interest for investors.
Interest rates in Europe and Japan
Central Banks in Europe and Japan have aggressively pushed interest rates below zero to stimulate their economies. It’s not clear if they recognize the profound deflationary effects of their policies. Savers are forced to save more to make up for low or negative rates, and banks run the risk of disintermediation (people putting cash under the mattress or buying gold), if rates are pushed far into negative territory.
Infrastructure in China
The China boom in the period 2005 to 2015 was largely driven by “infrastructure” investments such as railways, roads and airports. This boom has since ended. China can still be a destination for further investment, however. Investors just have to look outside the infrastructure sector. If China is going to make a transition to a consumer-led economy, they will need plenty of investment in retail, services, leisure, medical, etc.. Much of this investment is likely to be technology, telecom and “fulfillment” oriented.
The global economy is ever changing. While we don’t spend too much time here at Fort Pitt ruminating on issues evolving an entire world way, we know that technology makes our earth an ever smaller marble each day. We need to pay attention, so we do.