Stocks have retreated from multiyear highs and Fedex predicts a global economic downturn. The stock market highs were from an expected economic boost from Federal Reserve bond purchases. Some of the almost immediate retreat from these highs is certainly from profit taking by short term traders. However, the state of the global economy is far from healthy. Witness that Fedex predicts a global economic downturn based on its own projections in the shipping business. The assumption by Fedex and others is that high fuel prices and slowing trade will function as a drag on business well into 2013. Although the Fed stimulus plan may help the USA it will not help Chinese exports to debt ridden Europe. The US will likely see a boost to the housing market and more investment in home industry based on how the Fed stimulus plan is expected to operate. Over the long haul the fact that the US is printing money to get out of the recession for good will likely devalue the US dollar. That is another problem for China and other Asian export driven economies as exports from the USA will become more competitive.
Europe and Asia
Although an out and out Greek financial collapse has not happened the debt problem in Europe seems endless. The eventual solution may be the same as the USA is applying, print money to stimulate industry, pay off debts, and devalue the currency to make the economy more competitive. In the meantime the Chinese economy has slowed, the Chinese housing bubble is still a threat, and economies across Asia are feeling the pinch of fewer exports to Europe. A company like Fedex predicts a global economic downturn based on less business and their unique view of international shipments. As economies shrink companies are reverting to sea routes instead of shipping by air which directly affects the bottom line for companies like UPS, DHL, and Fedex.
A Unique View of World Markets
A company such as Fedex does business in the four corners of the globe. As such it gets a clear and early view of what is going on everywhere. Thus, when Fedex predicts a global downturn investors are wise to listen. To a degree Fedex profits have positive correlation with global business. Something that Fedex and industries in the world have in common is paying energy costs. The rise in fuel prices over the last year or more has been a drag on the economy. Part of the rise has been because of expanding business coming out the depths of the recession. And part has been to so called Iran tax, the price that has been built in to crude oil prices due to reduced exports from Iran and the threat of Iran shutting the Straits of Hormuz in response to trade sanction or the threat of war in that part of the world due to Iran’s nuclear ambitions. When Fedex predicts a global economic downturn investors are wise to check their portfolios and do a little fundamental analysis to see which stocks are likely to fall and which are likely to rise if economic conditions worsen going into 2013.