Anyone who thought President Donald Trump’s tariffs would have little impact on the global economy had better wake up and smell the coffee.
China’s economy is already getting slammed.
Their industrial growth is the worst in nearly 10 years.
In retail, the growth is the worst in 15 years.
And their auto sales are the worst in more than 30 years — down 12 percent in September, 13 percent in October and a whopping 16 percent in November.
“The economic news is disastrous,” says my friend Lee, a veteran Chinese businessman who just called me from Shanghai. “And the worst stats are the ones no one dares to publish.”
But China isn’t alone, and global investors know it. That’s why they dumped stocks again this morning and why global markets are tumbling.
Europe Next to Feel the Pain
The European Union was already reeling long before Trump came along. The big difference now is that their troubles are reaching critical mass and coming to a head …
- Italy’s budget deficit is out of control. The government just promised to slash it down to 2 percent of GDP. But it’s too much, too soon for Italy’s sick economy and too little, too late to satisfy European lenders.
- In the UK, any hope of a Brexit deal has been smashed.
- In France, the entire economy is vulnerable to spreading street unrest.
- Greek and Italian banks are in distress — again. This “illustrates a deeper problem in Europe,” says the Bloomberg editorial board. “The financial system’s overseers haven’t done nearly enough to prepare for the next crisis.
No wonder the euro is getting killed! No wonder it’s now within a half cent of an 18-month low.
Adding insult to injury, the European Central Bank just made two shocking announcements in one breath: Cutting its growth forecasts AND ending its bond-buying stimulus program.
Counting on more happy-go-lucky money printing to bail out the global economy? If so, this news should send a shiver up your spine.
U.S. Holding Up. But for How Long?
U.S. retail sales were just announced this morning, up 0.2 percent and in line with expectations.
Industrial production was up 0.6 percent, or double Wall Street’s forecast. Jobless claims have plunged.
So for now at least, the U.S. economy is still humming along.
But investors are looking into the future. They’re dumping stocks that do best in an expanding economy, like financials, transports and materials … while buying stocks that do better in recessions, like consumer staples and utilities.
Meanwhile, an even bigger shift is taking place in U.S. credit markets: Bond investors are suddenly waking up to the fact that too many high-risk companies have borrowed too much easy money for too long. So they’re dumping everything associated with higher risk.
Just in the last two months, they’ve yanked $27 billion from mutual funds that hold riskier bonds and loans. And they’re demanding the highest yields since Trump was elected.
All this is happening even before the U.S. and the world feel the aftershocks of China’s slumping economy. So watch out. It could be just the beginning.
Our recommendation: Reduce exposure. Build cash. And keep it in the safest place you can.
Good luck and God bless!