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Chemicals and the Economy

Ukraine, pandemic, herald major market shifts

Energy and financial markets are exacerbating the risks ahead. Oil prices at current levels – as the chart confirms, they now account for more than 3% of global GDP – have historically led to recession as the chart shows. The reason is that consumers have to cut back on their discretionary spending, which drives economic growth, in order to heat their homes and travel to work and school. Today’s high levels of natural gas prices add to this risk.

2015 operating rates confirm chemical industry slowdown

Financial markets are becoming more and more chaotic, with prices regularly moving by 1% per cent or more in a day.  Prices have also started to suffer sharp reverses of direction within a day, as talk of new stimulus competes with the reality of mounting supply gluts.  These developments are classic red flags, warning of […]

Market volatility jumps as Great Unwinding continues

As I have feared, major volatility is developing in financial and chemical markets, as the Great Unwinding of policymaker stimulus continues.  The chart above shows the dramatic increase in the benchmark portfolio since the Unwinding began in mid-August: There was very little volatility from January until August, with prices generally remaining within +/- 10% Volatility then […]

Hedge funds moving away from ‘buy on the dips’ strategy

In recent years, financial markets have believed that “everything is for the best in this best of all possible worlds“.  Good news has taken markets higher.  So has bad news – as investors assume policymakers will apply more stimulus. As a result, a whole generation of managers and analysts has grown up without having to learn the fundamentals of supply/demand analysis.  And […]

China’s president highlights ‘new normal’ of economic growth

China’s President Xi Jinping became the first world leader to highlight the move into a “new normal” at the weekend: “China is still in a significant period of strategic opportunity. We must boost our confidence, adapt to the new normal condition based on the characteristics of China’s economic growth in the current phase and stay cool-minded” “Through […]

China’s struggle for a new economy

“To most outsiders the language of official declarations is mind-numbing. Yet, having listened to Premier Li Keqiang and vice-premier Zhang Gaoli, I found (their plans) at least analytically convincing. They clearly recognise the need for decisive action in response to the challenges faced. What they want to do also makes good sense both on economic […]

5 years of stimulus have only delayed move to the New Normal

Coincidentally the blog began its 6-monthly review of global financial market performance on 7 March 2009, as the US market hit its post-Crisis bottom.  At this point, it was possible to hope that central banks would allow markets to resolve the issues that they themselves had created. After all, there would have been no subprime crash if the US Federal […]

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