Global growth story still intact, Sharpfokus59
Back to 3%
Have you noticed? US 10 year bond yields are back at 3%. They crept up the last few weeks while everyone was panicking about emerging markets. The US 10 year is my barometer of growth. When yield rises it means growth, when it falls, problems. 3% again shows the bullish global growth story is intact.
Five years ago
2013
Let’s start our story 5 years ago in 2013. Then the world was at the tail end of the mini boom after the 2008 crisis. We enjoyed 4 years of growth, but it was a rebound only & lacked strength. By 2013 it was starting to show signs of problems. For example mid 2013 was when the rupiah broke above 10,000.
Rest of World
2013 US 10 year interest rates were at 3% early in the year. This is not a high level, so it doesn’t mean strong growth, but it’s growth. UK rates long ago fell below US rates but in 2013 they were close at 2.7%. Meanwhile in moribund growth Japan 10 year yields were just under 1%.
Indonesia
In Indonesia, the decline in interest rates during the boom years was still holding on & 10 year yields were at 5.4%. Indonesia is the opposite of the US. When growth is strong, the rupiah is strong & our interest rates low. When growth weakens, so does the rupiah & interest rates go up.
2 years ago
2016
Now let’s fast forward 3 years to 2016, just 2 years ago. The underlying growth problems which were starting to show up in 2013 were now full blow to the point of almost catastrophe. The way we can see this is that interest rates in the major markets & the rupiah here, had collapsed.
Have you noticed? US 10 year bond yields are back at 3%. They crept up the last few weeks while everyone was panicking about emerging markets. The US 10 year is my barometer of growth. When yield rises it means growth, when it falls, problems. 3% again shows the bullish global growth story is intact.
Five years ago
2013
Let’s start our story 5 years ago in 2013. Then the world was at the tail end of the mini boom after the 2008 crisis. We enjoyed 4 years of growth, but it was a rebound only & lacked strength. By 2013 it was starting to show signs of problems. For example mid 2013 was when the rupiah broke above 10,000.
Rest of World
2013 US 10 year interest rates were at 3% early in the year. This is not a high level, so it doesn’t mean strong growth, but it’s growth. UK rates long ago fell below US rates but in 2013 they were close at 2.7%. Meanwhile in moribund growth Japan 10 year yields were just under 1%.
Indonesia
In Indonesia, the decline in interest rates during the boom years was still holding on & 10 year yields were at 5.4%. Indonesia is the opposite of the US. When growth is strong, the rupiah is strong & our interest rates low. When growth weakens, so does the rupiah & interest rates go up.
2 years ago
2016
Now let’s fast forward 3 years to 2016, just 2 years ago. The underlying growth problems which were starting to show up in 2013 were now full blow to the point of almost catastrophe. The way we can see this is that interest rates in the major markets & the rupiah here, had collapsed.
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ROW
In the US, rates had fallen in half to just 1.5, an alarming level. As the USS leads the world, we were on the brink. In the U.K. things were getting much worse with rates at just 0.6% showing how shockingly weak the U.K. economy has become. In Japan, 10 year yields were negative!
Indonesia
Meanwhile in Indonesia, the rupiah has lost almost half of its purchasing power & as a result, interest rates had almost doubled & climbed up to 8.5%! Yes it’s true Indonesia is affected by outside events, but the reason for this is because Indonesian economic growth is itsself so weak.
Now
2018
Just 2 short years later & we are now 3/4s through 2018. Things are looking much better in the US, where economic growth has rapidly accelerated. In the rest of the world & Indonesia, our frailties are laid bare for all to see. But thanks to the US things are slightly improved compared with 2016.
ROW
US 10 year yields are back to 3% (2.996% as I write). They e doubled since 2016 & have pulled the world back from the brink, just. In the U.K.yields have also doubled to 1.5%, embarrassingly low but better. Japanese yields have pulled up from their astonishing negative to now a whopping 0.1%!
Indonesia
Indonesia’s problems are now clearly shown up. In the rest of the world, yields are all higher compared to 2016 even though outside the US they still lag far behind. Here the rupiah has fallen & 10 year yields risen back to the levels of 2016. The only saving grace is we are slightly below where we were.
Rates will fall, stocks rise
With the global growth story still intact led by the US we can start to imagine bond yields rising & the $ declining,. That means rupiah strengthening, Indonesian rates falling, stocks rising. But our massive growth weakness have been exposed & help from outside will not be enough. We need structural change.
Hace a great week!
Sebastian
In the US, rates had fallen in half to just 1.5, an alarming level. As the USS leads the world, we were on the brink. In the U.K. things were getting much worse with rates at just 0.6% showing how shockingly weak the U.K. economy has become. In Japan, 10 year yields were negative!
Indonesia
Meanwhile in Indonesia, the rupiah has lost almost half of its purchasing power & as a result, interest rates had almost doubled & climbed up to 8.5%! Yes it’s true Indonesia is affected by outside events, but the reason for this is because Indonesian economic growth is itsself so weak.
Now
2018
Just 2 short years later & we are now 3/4s through 2018. Things are looking much better in the US, where economic growth has rapidly accelerated. In the rest of the world & Indonesia, our frailties are laid bare for all to see. But thanks to the US things are slightly improved compared with 2016.
ROW
US 10 year yields are back to 3% (2.996% as I write). They e doubled since 2016 & have pulled the world back from the brink, just. In the U.K.yields have also doubled to 1.5%, embarrassingly low but better. Japanese yields have pulled up from their astonishing negative to now a whopping 0.1%!
Indonesia
Indonesia’s problems are now clearly shown up. In the rest of the world, yields are all higher compared to 2016 even though outside the US they still lag far behind. Here the rupiah has fallen & 10 year yields risen back to the levels of 2016. The only saving grace is we are slightly below where we were.
Rates will fall, stocks rise
With the global growth story still intact led by the US we can start to imagine bond yields rising & the $ declining,. That means rupiah strengthening, Indonesian rates falling, stocks rising. But our massive growth weakness have been exposed & help from outside will not be enough. We need structural change.
Hace a great week!
Sebastian