Shanghai Composite Roared 5.6% On Positive Trade News

Shanghai Composite - Global Recession Here?

With the slowdown in America, Europe, and China, it’s no surprise the global economy could be in a recession. 

The World Trade Organization’s outlook for Q1 is 96.3 which is in the ‘below trend category.’ That’s the worst reading since March 2010. OECD categorizes the periods from 2011 to 2012 and 2015 to 2016 as a recession. So it’s no surprise this level of trade weakness could be consistent with a recession.

To be fair, trade growth could be weaker than it would ordinarily be based on this level of economic growth. This is due to the trade war between America and China. Electronic components index in the WTO outlook was the weakest category. It was at 88.7. That’s probably because of the America-China trade war.

As you can see from the chart below, the Ned Davis recession probability model is at 95.93. 

When the index is above 70, there has been a recession 89.7% of the time since 1970. The economy has always been in a recession when the index has been this high. 

It’s notable that just because the OECD hasn’t classified this as a recession yet, doesn’t mean the recession will last much longer. By the time economists recognize this recession, it will likely be close to over or over.

(Click on image to enlarge)

Strong Q4 German GDP report supports the possibility that Europe could be regaining some ground. American economy should rebound. The trade war has cooled off, the government shutdown is over, and the stock market decline is over. 

It’s also important to recognize that a recession isn’t 2 quarters of negative GDP growth. Since 1961, global GDP growth was only negative in 2009 when it fell 1.73%. If the global economy picks up, it could support the modest rebound in America that I’m counting on in Q2.

Shanghai Composite - Trade War With China Cooling Down

A trade war between America and China is mostly over. 

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