Synchronized Global Recovery Underway11/21/2017
U.S. and global economic activity in the first half of 2017 gave every indication that a recession was on the horizon. Economic, social, political and military indicators all seemed to point to an increasing probability of a recession.
Even though the current U.S. economic recovery is the third longest in history, neither the U.S., other developed economies, developing economies, emerging markets, nor frontier economies have a strong enough economic foundation to weather a significant economic downturn.
In normal times a recession has more positives than negatives as an economy or economies rebalance, but the current economic times are not remotely normal.
A U.S. recession today would have a global domino effect as country after country joined U.S. recessionary ranks. A number of countries could lead a global downturn that remains stable. They include:
- Chinese Credit Crisis: If China mismanaged their credit crisis, then a global recessionary domino effect would likely follow with country after country slipping into recession or worse.
- EU Misstep: A European Union leadership misstep could trigger a global recessionary domino effect.
- Japanese Fiscal or Monetary Policy Miscalculation: If Japan lost focus or control of their government debt repurchase program, triggering lost global confidence, then a potential contagion would likely follow.
Second Half of 2017
With each passing month in the second half of 2017 the U.S., Chinese, European, Japanese, etc. countries fiscal, monetary, trade and regulatory policies have met the challenges of extending the business cycle.
Visually, think about a global map of the world lying flat with the U.S. and Western Hemisphere on the left and moving left to right scanning the Western Hemisphere, Europe to Africa, Middle East on across to China, Japan, Australia, etc.
As the 2017 calendar year has progressed, massive global simulative reflationary policy activities have continually emerged, starting on the right side of our flat global map, especially in Japan and China, rolling across the global economic landscape from right to left including the Middle East, Europe, to the U.S. and Western Hemisphere in general. Massive levels of stimulus and liquidity were injected in 2017 to assure economic momentum and an expansion of the business cycle.
A global orchestrated fiscal, monetary, trade and regulatory policy effort has allowed the extension of a “Synchronized Global Recovery” for one to 3-plus years into the future.
This implies the following will likely take place in the near and intermediate term:
- Global Currencies: The U.S. and Chinese currency will have more weakness than strength against most global currencies.
- 10-year Treasury Yield: The short end of the yield curve and long end of the yield curve will have a slow rise.
- U.S. and Global Equities: U.S. and Global Equities will be major beneficiaries of the massive amounts of injected stimulus by most of the world’s economies.
- Commodities: Commodities as a group will benefit over the next 12 months. Copper, base metals as a group, energy and ultimately the soft and grans sectors will be supported by building global inflationary forces.
What could derail the recovery?
The current list of economic, social, political and military possibilities is formable and far too lengthy and detailed for this article. That said, the damage of a near term global recession provides huge incentive for a continued U.S. and Synchronized Global Recovery.
What to expect from the markets this week, November 20, 2017
Market “Near Term” Snap Shot
- Rice: This market is moving closer to confirming current price action is corrective with another leg to the upside (Charts 38 and 39).
- Cotton: Cotton slowly and almost begrudgingly confirming a bottom is in place (Chart 40 to 42).
- Soybeans: A complex market that is likely building a base before moving higher, holding $9.70 likely important to near term price strength (Charts 32 to 34).
- Corn: Searching for a low, so assume bearish until price action becomes more supportive of a bullish case and give consideration to prices possibly moving to their previous 2016 lows of $3.15 or below (Charts 35 to 37).
- Wheat: Holding current price levels implies a building bullish bias (Charts 43 to 45).
- 10-year Treasury Yield: Presently consolidating, but remains in a Sideways-Trading-Range between 2.14 and 2.60 (Charts 1 to 3).
- U.S. Dollar: Possible corrective action continues, but once complete the door is open for a decline to 87 (Charts 4 to 6).
- Feeder Cattle: Near term high likely in place, consolidation or corrective price action underway.
Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service. E-mail: firstname.lastname@example.org.
Source: Bobby Coats, Delta Farm Press