KINGSTON, NY, 10 February 2016 — As evidenced in our Trends in the News broadcast, we forecast that the Panic of 2016 would usher in the new year. It did.
Despite Deutsche Bank’s shares, spiking today on the hype of a bond buy-back, the banking sector and fundamentals of the world economy remain at high risk. Global stock indexes have plunged into bear territory, currencies are crashing – and as commodity prices tumble, resource-rich nations going broke are begging the World Bank and International Monetary Fund to bail them out.
Neither “The Panic” nor the Global Recession, one of our Top Trends for 2016, will spare any country, large or small.
For example, China, the world’s second-largest economy, has seen its Gross Domestic Product descend to 1990s lows. To stop capital flight of its rapidly falling yuan, the government depleted its foreign-currency reserves by over $200 billion since December. While China still holds $3.23 trillion in reserve, the IMF estimates the nation needs an estimated $2.75 trillion to manage its financial system, leaving it with only a $500 billion buffer.
In Japan, the world’s third-largest economy, after its central bank initiated its negative interest rate policy less than two weeks ago, shares of Japan Post Bank tanked 20 percent, and the Topix Banks Index lost 21 percent.
Germany, the world’s fourth-largest economy, had its top two banks, Deutsche Bank and Commerzbank, plunge in value by nearly 10 percent on Monday.
Also on Monday, in the fifth top economy, the United Kingdom’s Standard Chartered Bank fell 6 percent, Barclays was off 5.3 percent and HSBC was down 4 percent.
Since the start of the new year, French giant Societe Generale tumbled over 30 percent and BNP Paribas fell 20 percent. Italy’s two largest banks, Unicredit and Intesa Sanpaolo, have declined 43 percent and 28 percent respectively. Swiss-based Credit Suisse plummeted 40 percent and UBS is down 30 percent. Spain’s Banco Santander has fallen 15 percent since 2016 dawned.
And in America, the world’s largest economy, the KBW NASDAQ Bank Index is down nearly 20 percent since the year began. Among the big-bank stock losers, Morgan Stanley is down 29 percent; Citigroup and Bank of America are off 27 percent; Goldman Sachs is down 17 percent; and Wells Fargo and JPMorgan Chase are both down 14 percent.
The Panic is on
This unprecedented bashing of bank stocks is a clear signal of great financial distress — the causes and effects of which we have detailed in our Trends Journals, Trends Monthly, Trend Alerts and Trends in the News broadcasts. In addition, with central banks imposing negative interest rates, it is less profitable for banks to lend, thus reducing their earning power, and adding more downward financial pressure during a time of increased distress.
Trend Forecast: While down early today, gold is the safe-haven commodity in times of geopolitical and socioeconomic strife. We forecast that gold must remain steadily above $1,200 to reach its next breakout point, $1,400. Once stabilized above $1,400, we project a $2,000 range.