Sukyong Yang / January 13, 2016

Global Strategy Year End Review

The latest installment of Star Wars – The Force Awakens entertained millions with the good fighting off the evil Empire. It is unfortunate that the Force could not exist in the real world and fight off all that is evil. There were 6,692 migrant deaths in the Mediterranean Sea in 2015 with more than one million irregular migrants arriving from Syria, Africa, and South Asia. Both are appalling statistics. Along with these gruesome numbers, we may also associate last year with the disturbing and dramatic increase in the number of large scale attacks. We connect this with the unfortunate events of the two terrorist attacks that took place in Paris in January and November given the media attention alongside these particular events. But the reality is that there were 385 terrorist attacks globally last year, many of which received little attention from Western media. This made the year a gloomy one indeed and this sentiment was also reflected in the turbulent and challenging markets. Sadly, as the frequency of terror attacks increases, the market reaction continues to be relatively more muted.

Despite the market not being shaken radically from shots of terror, there is anxiety for various reasons, one of which is that we have yet to witness a robust recovery or a global expansion since the last recession. Another reason is the growth realignment in China resulting from weaker demand, which led to a downturn in commodity prices and prolonged manufacturing overcapacity. Hence, there have been global repercussions and global deflation potentially. The producer price index is at its lowest average point for six years in the ten largest economies in Asia excluding Japan. For example, China’s producer prices are down a cumulative 10.8% from their recent peak in 2011 and we can see the dramatic decline of various commodity prices in the chart below.