¿Estaremos entrando en una fase de estancamiento? Eso parece…
Secular stagnation or secular boom?
The notion that some countries are caught in a long and protracted period of low growth has received an increasing amount of attention and has been labelled "secular stagnation". The pessimism that the idea of secular stagnation has created has been reinforced by the notion the potential for emerging markets to grow is becoming weaker. The point that I want to make in this post is that one of these notions (secular stagnation) is looking backwards at the performance of advanced economies while the other one (potential pessimism about emerging markets) is looking forward and speculating with their inability to do as well as in the last decade.
Let's start with a simple chart that summarizes the pattern of annual growth in the world over the last decades. Data come from the World Economic Outlook database (IMF). I have decided to include the last 13 years for the decade that starts in 2000.
Two observations: growth (by decades) has been remarkably stable in the world, between 3.2%-3.6%. Second observation: during the last 13 years growth has increased relative to the previous two decades. No global stagnation, if any, acceleration of growth.
But if we split the world into advanced and emerging markets we see a very different pattern. [I will use the label emerging for any country which is not advanced - the IMF will call them emerging and developing countries].
While in the 80s, and some extent in the 90s, both groups grew at a very similar rate, in the last 13 years annual growth rates in emerging markets have been three times higher than those of advanced economies. So stagnation might be the right label for 50% of the world, but accelerating growth is the right label for the other half.
And if we look at the engines of growth, in particular investment rates (in physical capital) we can see again the divergence in performance.
Investment rates for the world are fairly stable over all these years with possibly some mild increase in the last 13 years. And that increase is driven by an explosion in investment rates in emerging markets (by 50%) at the same time that investment falls in advanced economies below the 20% level.
Looking at the above charts, one wonders whether the divergent performance of emerging markets and advanced economies is related. Could it be that investment opportunities in emerging markets moved capital away from advanced economies? Not obvious because we know that the explosion in investment rates in emerging markets came in many cases with even larger increases in saving rates and (financial) capital flew away from these countries. In fact, interest rates in the world were trending downwards during this period. And this makes the performance of advanced economies even more surprising: despite a favorable environment in terms of low interest rates, investment and growth declined.
Abrazos,
PD1: ¿Cómo está EEUU?
I have written extensively about the data behind the headline media reports. I have also discussed the importance of the relationship between the underlying data trends relative to broader macroeconomic perspectives. However, it is sometimes helpful just to view the various economic indicators and draw your own conclusions outside of someone else's opinion.
With the economy now more than 5 years into an expansion, which is long by historical standards, the question for you to answer by looking at the charts below is:
"Are we closer to an economic recession or a continued expansion?"
How you answer that question should have a significant impact on your investment outlook as financial markets tend to lose roughly 30% on average during recessionary periods. However, with margin debt at record levels, earnings deteriorating and junk bond yields near all-time lows, this is hardly a normal market environment within which we are currently invested.
Therefore, I present a series of charts which view the overall economy from the same perspective utilizing an annualized rate of change. In some cases, where the data is extremely volatile, I have used a 3-month average to expose the underlying data trend. Any other special data adjustments are noted below.
Leading Economic Indicators
Durable Goods
Investment
ISM Composite Index
Employment & Industrial Production
Retail Sales
Social Welfare
The Broad View
Economic Composite
(Note: The Economic Composite is a weighted index of multiple economic survey and indicators - read more about this indicator)
If you are expecting an economic recovery, and a continuation of the bull market, then the economic data must begin to improve markedly in the months ahead. The problem has been that each bounce in the economic data has failed within the context of a declining trend. This is not a good thing and is why we continue to witness an erosion in the growth rates of corporate earnings and profitability. Eventually, that erosion combined, with excessive valuations, will weigh on the financial markets.
For the Federal Reserve, these charts make the case that continued monetary interventions are not healing the economy, but rather just keeping it afloat by dragging forward future consumption. The problem is that it leaves a void in the future that must be continually filled.
In my opinion, the economy is far too weak to stand on its own two feet. With the Fed easing off the current rate of bond purchases, it will be interesting to see what happens in the months to come. While there will certainly be positive bumps in the data, as pent up demand is released back into the economy, the inability to sustain growth is most concerning. From this perspective, it could become increasingly difficult for the Federal Reserve to remove their "highly accommodative stance" anytime soon
PD2: Ha habido un cambio entre los países que tenían crudo y los que no. En EEUU el shale gas les ha venido de perlas. En los próximos años habrá muchos países que cambiarán por sus reservas de petróleo y gas:
Con el shale gas, en España llegamos tarde. Y en otros países de Europa también:
Salvo Polonia, y Ucrania…:
PD3: Ahora que empieza Mayo, mes de María, te sugiero que reces el Rosario de manera diaria. Puedes pedir por muchas cosas: por ti, por los tuyos, por el Papa Francisco, por los sacerdotes, por los enfermos, por los pobres, por las Almas del Purgatorio… Sí, parece que es cansino, pero mientras lo rezas haces oración. Quizás te ayude esto https://play.spotify.com/album/0DsUL5tt96oQ3DctdYtdG5. Lo pinchas, te registras para poder oírlo, y te ayuda a seguirlo.
