The markets are uneasy, but should we be?
“The Chinese economy is clearly slowing, there are a lot of headwinds, there’re companies leaving China. China’s becoming a much harder investment case for a number of reasons,” says China financial expert Fraser Howei.
I warned that China was hitting a bubble back in 2016, and would have an accounting - depending on who would be president.
With Trump as president, a strong nationalistic approach (primarily tariffs) has forced China to renegotiate its financial position.
The US is holding a Tiger by the tail; but if it can stay strong, China has no other option than to bend to the will of America (the greatest buyer of goods in the world). In any deal, the buyer always has the upper hand.
In my previous blog, I mentioned trouble areas: 1) The 2016 US election, 2) China's purchase power around the world, 3) Middle-East unrest, and 4) Other foreign powers.
1) With Trump in the White House, expect a strong nationalistic view and business style political bargaining. I argue that this lends itself to a greater deal for Americans, in the long run.
2) China's increasing debt will force them to reduce international purchases...maybe even a move to selling their assets.
3) The Middle-east unrest (ISIS in particular) has been virtually extinguished, talks between Israel and Saudi Arabia are looking good, and Iran has little to bargain with, now that Trump has bowed out of the Obama nuclear agreement.
4) Other countries have had to reassess their position with the US, in the areas of UN peace keeping, resetting trade imbalances, etc.
Brazil is digging itself out of a recession.
Europe has put a halt to endless migration complications.
The UK is at the end of ironing out the Brexit situation...I suspect they will be a good partner of the US and bounce back from financial insecurities.
I could see Vietnam (and other Asian countries) taking a chunk of market share from China. This would diversify (so to speak) the US manufacturing portfolio, and reduce the risk of too many eggs in China's basket.
In the end, the US is the major superpower, not just in defense, but in economic prowess. This makes her the best game in town for investment and deal-making.
Is the US strong enough to stay the course?
Some have speculated that the "Inverted Yield" predicts a recession. I disagree. Once financial agreements are solidified between countries, things will level out. If Americans can stay strong and hold out against the Chinese powerhouse, hang on for a bumpy yet successful ride into a new reset of capitalism around the world.
