What will happen after the coronacrisis?Navagates broker forecast

What will happen after the coronacrisis?Navagates broker forecast

What will happen after the coronacrisis?Navagates broker forecast
Tyler Brown - 03/03/2020

The theory of cyclical economic development says that a recession always replaces the period of economic growth. The last major crisis in the world occurred 12 years ago. In 2009 due to the global crisis, according to the Navagates broker review, global GDP fell by 2.2%. However, many economists and financiers believed that humanity would be able to control the economy. Instead of a crisis, there waited for a redistribution of resources and market shares, and no large-scale shocks.

In 2020, the theory of economic cycles received another confirmation. Financial market pessimists, including Navagates broker, have warned of a possible recession over the past few years so the business can prepare for this period. At the same time, many businesses relied on the wisdom of the market, the power of regulatory instruments, the stability of the US dollar, and other factors that could prevent a large-scale crisis, reducing it to a light recession. However, in 2020, a "black swan" appeared on the horizon - an unexpected event that changes the course of history.

Such a "black swan" is the pandemic of the coronavirus COVID-19, for the sake of which many states closed their borders and introduced severe quarantine. It seems that new diseases appear regularly, and humanity has already learned to stop outbreaks. But the new virus turned out to be malicious. It spreads quickly, does not manifest itself immediately, and has a high mortality rate. Navagates forex broker recalls that a significant role was played by the Chinese authorities, who initially tried to hide information on a new disease. During this time, tourists spread the virus around the world, so it became impossible to stop the outbreak in a particular region.

It would be foolish to say that all economic problems are connected only with the epidemic, experts at Navagates forex broker said. But, like the "black swan" from the books of the economist Nassim Taleb, the outbreak sharply exposed all the problems that had been previously masked and hidden. There are an overheated economy, and a crisis of overproduction, and bloated social obligations in many countries, and domestic debts ...

Another negative factor that hit the global economy was the price war on the oil market, which began in March 2020 after the withdrawal of Russia and Saudi Arabia from the OPEC + agreement to reduce production. Due to the epidemic in China, production has slowed down, and energy demand has fallen accordingly. The prospect of an increase in oil production has led to the price of Brent oil since March 18 has dropped below $ 25 per barrel and has updated a minimum since 2003. The price of US WTI raw oil fell to the level of 2002. In fact, OPEC has ceased to fulfill its functions, experts at Navagates forex broker say, and the fate of the cartel is the question. It is not a fact that after the end of the crisis, it will exist in the previous format.

The deterioration of economic forecasts is happening in real-time. Recently, the IMF predicted that global economic growth would slow by a tenth of a percent. But now experts warn both Europe and the United States are on the verge of a financial collapse. The fact that in China the economic failure is more significant than expected is a fact, writes Navagates forex broker review. Retail trade has decreased by one-fifth part, and capital investments have contracted by a third. First, domestic demand collapsed due to quarantine, and now an external demand suffers due to similar problems in Europe and the USA. So a return to previous growth rates will be long.

The European Commission has revised the forecast for GDP growth and reported a projected decline of 1%, although earlier growth was expected at 1.4%. In the US, estimates are also deteriorating: Goldman Sachs analysts forecast a zero GDP growth in the US in the first quarter, and the second - an immediate decline of 5%. If the global situation does not worsen, according to navagates.com reviews, a recovery growth of 3-4% is expected in the 3rd and 4th quarters. The general forecast for the US economy for 2020 is the growth of 0.4% instead of the previous forecast for growth of 1.2%. But this is an optimistic forecast: JPMorgan analysts say there is a high probability of a technical recession in the USA. This is precisely the decline in economic that the theory of cyclical economic development suggests. In practice, it means an economic downturn for both the first quarter and the second.

The International Monetary Fund joined the pessimists. Just a month ago, the IMF assured that the world economy would accelerate to 3.3% by the end of 2020 after rising 2.9% in 2019. Now, the IMF is mobilizing $ 1 trillion to help different countries in their fight against coronavirus. The global economic growth in 2020 will not reach 1.6%, as previously expected, but 0.4%. And this is also still an optimistic forecast, according to navagates.com reviews. The countries of the "golden billion" cannot simply leave the rest to their fate. In a globalized world, the crisis in the minor countries means local wars, environmental degradation, refugee flows, and new outbreaks of dangerous diseases.

Let's think about how it looks in practice and concerns each of us. In the global economy, production chains are long and complicated, writes navagates forex broker. Just one drop-out link - for example, the shutdown of an enterprise - can break down processes that have been set up for years. Quarantine at one Chinese enterprise that produces the necessary equipment or even components for equipment can stop an entire industry. For example, an enterprise that provides displays for the iPhone is blocked. Let the downtime last only a month, but during that time many thousands of displays will not be produced. The assembly lines tied to this supplier will stop. Consequently, other manufacturers of parts for the iPhone will be forced to wait until production restore. But not all of them can survive a one-month stop. Naturally, the demand for raw materials for these parts will fall because the enterprises have not yet processed the monthly stock. So, due to the domino effect, the closure of one critical enterprise causes a decline in the entire industry. From such stresses, the economy has been recovering for years.

Probably, experienced navagatesforex broker traders will be pleased to hear that the financial markets were the best prepared for the economic recession. People who used to analyze the market and read the forecasts on navagates.com reviews have noticed signs of an impending crisis. Experts and investors warned of a global recession in 2020 even before the coronavirus epidemic and related panic. In March 2019, the yield on three-month US government bonds at some point coincided with the rate for 10-year US securities and then exceeded it for the first time since 2007. Navagates forex broker experts wrote that this reliable leading indicator is indicative of an impending recession. The time lag between the growth in demand for government bonds and the start of a recession may be in six months to a year. Experts at Navagates broker predicted last summer that already in March this year, a new economic crisis could start in the world.

So, the world is entering another economic crisis. Thousands of people died from the virus; thousands will suffer from economic problems. Stock markets collapsed, commodities are getting cheaper, financial markets are close to a stupor, and the projected drop in GDP is from 5% to 15%. navagates forex broker experts remain optimistic and believe that humanity will sooner or later defeat the virus. But what will happen to the global economy by this time, and most importantly - what will happen after? One hundred years ago, the twenties roared in the world - a time of economic growth, luxury, and fun. After that, the worst economic depression in the foreseeable history started. It is possible that in 2020 the previous decade will seem to us a golden age of slow but steady economic growth: growth in employment, lower inflation, and interest rates. Based on the analysis of the Navagates forex broker review, we made several forecasts. Soon we will be able to check how close they are to reality.

1. Globalization of trade will reverse. The world will appreciate short production chains that are not tied to Chinese suppliers. Protectionist measures designed to protect local producers will come into fashion. Small and medium-sized businesses will begin to snowball, especially in countries with tax breaks. Alas, writes the navagates forex broker review, it will be a difficult period for large businesses: loss of business partners, restructuring, and staff reduction. Trade barriers always reduce economic growth: the large business simply does not have the opportunity to create new jobs. Those companies that can survive in a few years will occupy a dominant position in the market, absorbing competitors and their market shares.

2. Expected boom in telecommunications and IT. The most stubborn conservatives during the quarantine period will try remote work and chat with people on the Internet. Homeschooling, distributed teams, process automation will become part of everyday life, and we cannot live without it. However, this uprising of machines is started not by a computer virus, but by a completely human one. Sorry, but hotels, airlines, and the entire tourism industry were not lucky, navagates forex broker notes.

3. Consumer caution will continue for much longer than after the 2008 financial crisis. The attitude towards the purchase of durable goods and services will change for years. This will affect the structure of consumer spending and, accordingly, retail sales. So, manufacturers and suppliers need to prepare now. Consumers can consider additional earnings with navagates forex broker.

4. After national banks have exhausted their ability to influence inflation through manipulation of the interest rate, many states will have to review financial structures. One of the possible options is to strengthen the role of the state in the economy and start large-scale infrastructure projects. The infrastructure project includes jobs and long-term investments and raising the general mood, finally. In the United States, Republicans, Democrats, and the navagates forex broker agree that this is a necessary measure. Consequently, the huge US public debt will continue to grow. 

5. The crisis of overproduction will not disappear so quickly. The production will exceed demand - now due to a drop in consumer spending for everyone except navagates forex broker traders. This is an additional factor of pressure on private business and a constraining factor for economic recovery.

6. With the economic recession on a background, Donald Trump will lose the election and will not stay for a second term. He will be reminded of how frivolously he reacted to the first reports of the epidemic. Also, the American oil industry has questions to him - now they are suffering from falling oil prices, navagates forex broker review notes. If Trump does not take decisive and effective measures in the nearest future, we will not see him in the White House anymore, except as a guest.

7. The economic recession and the change of president may finally push for US health care reform. Currently this is a black hole, which devours a third part of the federal budget. Each new president promises the health care reform, but no effective measures have been taken, writes navagates forex broker.

8. For the American oil industry, the crisis can be fatal, navagates forex broker warns. The oil war between the Saudis and the Russians is most harmful to shale oil producers in the United States: this technology is more expensive than conventional drilling. Saudis will be able to survive low oil prices, but the United States and Russia not.

9. In stock markets, long-term treasury bonds will be held in high esteem. But stock indices will fall by 30 percent, to the levels of 2007-2008. By the way, traders from Wall Street and navagates forex broker may be named among the culprits of the current crisis - this is a scam. But regulatory measures in financial markets may increase. So, until this happens, do not miss your chance to make money with Navagates forex broker.

Comments (0)

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