From a geopolitical point of view, tensions at a global scale are beginning to rise and disagreements between different large groups of people are showing up. There’s also a rise in global terror, with increasing conflicts in the Middle East, which could potentially reshape the relationship between countries over the next few decades.
Should this impact the stock markets?
People who trade stocks should carefully monitor these developments, since economic activity could be influenced, thus the performance of the stock markets weakened. If we refer to the Western world, the year 2009 was the beginning of a new business cycle or short-term economic cycle.
However, it did not show up evenly in each country. The United States, which is the biggest military and economic power saw the greatest recovery seen since the Great Depression of 1929. European countries, on the other hand, faced greater challenges, due to different fiscal policies and cultural differences across all EU members.
We are now in the 9th year of this economic expansion and there are increasing concerns about a global economic slowdown which will accentuate over the next few years.
Protectionism and isolationism
The war in Syria led to a strong wave of immigrants heading to western European countries which had triggered serious worries about the ability to absorb a large number of people. Divisions between EU members, because of this migration crisis, are showing and a defensive approach leading to border enforcement could have a strong impact on economic activity since most of these countries rely on heavy exports.
The German economy had contracted by 0.3% in the third quarter of 2018, fueling the fears of an economic slowdown in Europe. According to official numbers, 46% of the GDP in Germany comes from exports and this weakening economic activity shows that there is a weaker demand for products or services.
The situation is not very different in the US, where President Donald Trump is pushing harder for tougher migration laws and a Mexican border wall, threatening to shut down the government, if the Congress won’t vote for the wall funding.
Such a move will not only increase the already gigantic US budget deficit but will weaken the ties with one of the most important economic allies.
The leadership can make a difference in this situations and it is up to them to deal with disagreements effectively and come out with the most effective solutions.
