Saturday, 26 March 2016 00:00

Chart Of The Day: Global Recession Is Coming

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Going by the collapse in the Purchasing Managers Index for February 2016, it is entirely likely that the world is headed towards recession sooner than expected.

The chart below gives the manufacturing, services and composite PMI for February 2016 and its clear that services sector activity has slumped.

 

Global Recession Indicated By Purchasing Managers Index

 

Global manufacturing sector is unlikely to be the saviour through 2016 and if there is no recovery in the services sector activity; the PMI would indicate global contraction in March 2016.

I must add here that US GDP growth estimates also point to weakening growth. This data again underscores my point that rate hike is unlikely in the coming quarters. On the contrary, I expect renewed expansionary monetary policies from central bankers globally and a potential rate cut by the fed towards the end of 2016.

From an investment perspective, I believe that good times for gold will continue and equities can decline in the foreseeable future. While meaningful slowdown or recession is negative for equities, the fundamental factor of liquidity injection can arrest the decline for equities and other risky asset classes.

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