Practical analysis for investment professionals
04 December 2014

Turning Points: The Status Quo Is Changing

Posted In: Weekend Reads

The status quo is changing markedly. Oil prices are heading south as the United States ramps up production and OPEC refuses to cut to compensate. Moreover, global demand is looking sluggish with weakening growth in Europe, Japan, and China. The weakening of Chinese demand suggests that there could be a regime change taking place whereby the global driver of commodity demand is declining at precisely the moment when the expansion of global supplies is finally arriving. The US dollar is rising and other major currencies are weakening. While some argue that the United States will experience a robust manufacturing renaissance, it appears the United States is only a temporary winner of a complex financial game played by politicians.

The markets remain at elevated levels both on a market-cap-to-GDP basis and a cyclically-adjusted-P/E (CAPE) basis. With Fed support for markets waning, the underlying health of markets and economies remains suspect. When all the facts are taken in combination, the case for a change in the status quo is gaining strength.

Here’s a wrap-up of key issues affecting global markets for fundamental investors.

Currencies

Commodities

China’s Direction

Credit Markets

Derivatives

Energy

Euro Crisis

Hedge Fund Money

Interest Rates and Central Banks

Japanese Debt and Inflation

Stock Market

Follow the Bubble

Time Capsule

Six years after the collapse of Lehman Brothers, it is a good time to reflect and perhaps gain some insight on the events leading up to and including tits catastrophic failure. In “Why Lehman Wasn’t Rescued,” we learn about the legal structures that prevented the government from stepping in and providing assistance to a private sector firm.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©iStockPhoto.com/erhui1979

About the Author(s)
Ron Rimkus, CFA

Ron Rimkus, CFA, was Director of Economics & Alternative Assets at CFA Institute, where he wrote about economics, monetary policy, currencies, global macro, behavioral finance, fixed income and alternative investments, such as gold and bitcoin (among other things). Previously, he served as SVP and Director of Large-cap Equity Products for BB&T Asset Management, where he led a team of research analysts, 300 regional portfolio managers, client service specialists, and marketing staff. He also served as a Senior Vice President and Lead Portfolio Manager of large-cap equity products at Mesirow Financial. Rimkus earned a BA degree in economics from Brown University and his MBA from the Anderson School of Management at UCLA. Topical Expertise: Alternative Investments · Economics

1 thought on “Turning Points: The Status Quo Is Changing”

  1. Chuck T says:

    Great article.
    You definitely made a case for a changing status quo with articles to back it up.
    Makes you wonder how the market keeps climbing.

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