When Wall Street and other mainstream analysts provide forecasts for the markets, one must always take them with a grain of salt since these investment banks also have skin in the game for the outcomes they prognosticate. But at certain points in a business cycle the data becomes impossible to hide, and what is reported by these analysts can be quite accurate as to the real state of an economy.
Thus when J.P. Morgan started the year on Jan. 4 by downgrading 21 of 22 emerging markets, it appeared to be dead on as global markets fell precipitously on Monday, with some like in China declining more than 7% in a single session.
Twenty-one of the 22 biggest emerging markets tracked by JPMorgan have seen a downgrade in its 2016 consensus economic growth forecast. The only exception is the Czech Republic, whose GDP growth forecast stayed flat.
Widely acknowledged as troubled economies, Brazil, Greece and South Africa have been given some of the biggest downgrades in the past quarter.
Brazil is predicted a 1.2 percent GDP contraction, compared to the previously predicted 0.2 percent growth.
The Greek economy is expected to decrease 1.2 percent, rather than remaining flat. South Africa is to see 1.6 percent growth, not the previously forecast 2.3 percent.
According to JPMorgan, Russian growth should not be expected, while previously the analysts of the bank predicted a 0.5 percent growth.
Other countries were downgraded because of the expected slowdown in global growth. The Chinese and Indian economies will see 0.2 percent slower with 7.4 and 6.5 percent, respectively, according to the report. – Russia Today
In addition to foreign emerging market downgrades, J.P. Morgan also reported that credit spreads in U.S. markets were crashing, but refrained from actually calling out the economy as being in recession. Historically however, credit spreads are one of three indicators that have accurately forecast whether an economy is in recession, with yield curves and profit margins being the other two.
When the Great Recession of 2009-2010 hit, Fed Chairman Ben Bernanke refused to tell the public that we were in an actual recession for several quarters after it had actually begun. And since Wall Street relies upon controlling the emotion and confidence of consumers and investors to keep their rigged casino going, looking at the data more than at forecasters will provide you better information on the state of the markets, and where the economy is headed for the coming year.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com, Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.