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Durudarshan - Investment Analysis

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IEconomic Recovery may continue into 2016 and beyond...

Posted on December 2, 2015 at 11:05 AM Comments comments ()
Good afternoon, ladies and gentlemen, I believe we can factor in a slight slowdown in China for the foreseeable future.  A slight slowdown from an impressive GDP number of nearly 7 percent annually is still quite impressive.  Because of the change in focus, future growth in China will be like the mature economies, though there is still huge potential for growth in the nature of a developing economy outside the major towns and cities.  So they are not in a mad rush to develop further as rapidly as before, and can patiently wait till the commodities prices hit a bottom before restocking.  That time may be arriving soon, if not already here.

Economic activity and growth in the Euro Area seems assured, after the ECB President Mario Draghi announced the central bank's willingness to extend the Stimulus beyond September 2016, coupled that day with a 10 basis points reduction in the interest rate.  This in itself will give companies the courage and backing to borrow and invest in innovation and upgrade, and in due time create additional jobs and wealth for the future. 

The United Kingdom is experiencing increased activity and creation of jobs and apprenticeships, successfully concluding deals with China and India recently for major projects.  It is anybody's guess that David Cameron is lining up similar deals with other nations.  The prospects are rosy.

People wishing to buy houses to live in may find the circumstances favourable, as the Chancellor has announced 3 percent additional Stamp Duty for the buy-to-let landlords, as well as taking away the tax breaks on the 40 percent tax-band.  This may cool down the property market just a bit, to allow families to buy their first property.  This seems to be the intention of this strategy. 

I am surmising the benchmark rate won't be going up just yet, perhaps not for a good few months more.


The U.S. Federal Reserve keeps all guessing, but there again, I am surmising the rate won't be hiked up just yet.  Just the talk of it seems to impact consumer spending, as happened in a recent month.  So I am assuming Dr Yellen will generously allow the people to continue spending freely, without fear of an imminent rate hike. 


As for the Debt Ceiling, this line in the sand as one American banker put it, will come up for review on 11th December, although arrangements are in place to continue it upto mid February.  Here I imagine they may wish to fix this for another year, taking the economy safely upto December 2016, or even beyond.  No purpose to have Mr Obama having to curtail his holidays to rush back to Washington and the cold corridors of power near Christmas for this purpose, as happened on a previous occasion.  If the debt ceiling is fixed for a year or so, everybody can have a cosy time celebrating Christmas. 


Everybody would say Cheers to that.

Durudarshan

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