Skip to main content

Advertisement

5 Divident Stocks T0 Own Forever
Global Recession Could Become Reality: Here’s Why You Should Worry Lombardi Letter 2019-10-02 09:57:31 global recession global economy world economy A global recession could become reality sooner rather than later. There are lots of warnings all over, and it would be a bad idea if investors overlook what’s happening in the world economy. Global Economy https://www.lombardiletter.com/wp-content/uploads/2019/10/iStock-505289018-150x150.jpg

Global Recession Could Become Reality: Here’s Why You Should Worry

Global Economy - By |
Global Recession Could Become Reality

iStock.com/505289018

Warnings of Global Recession Popping Up all Over

The world economy is in trouble. No matter what the mainstream media tells you, don’t get too complacent. A global recession could become reality sooner rather than later.

The signs of a recession are emerging all over.

Advertisement

5 Divident Stocks T0 Own Forever

Companies are nervous as they see the global economy slow down. Look at FedEx Corporation (NYSE:FDX), for example. Just recently, the company reported its financial results for the first quarter of fiscal-year 2020. Its profitability took a hit and the company issued a dire outlook.

Frederick W. Smith, CEO of FedEx said, “Our performance continues to be negatively impacted by a weakening global macro environment driven by increasing trade tensions and policy uncertainty.” (Source: “FedEx Corp. Reports First Quarter Earnings,” FedEx Corporation, September 17, 2019.)

Mind you, this wasn’t the first warning of a slowing world economy by FedEx. The company has been sending warning signals for a few quarters now.

Also, FedEx isn’t the only company warning about slowing economic growth. The list of such companies continues to get bigger.

Even the Optimists Issue Dire Global Outlook

But don’t just look at companies. The Organisation for Economic Co-operation and Development (OECD) came out with a gruesome global outlook at as well.

These were the words by the OECD: “The OECD projects that the global economy will grow by 2.9% in 2019 and 3% in 2020 – the weakest annual growth rates since the financial crisis, with downside risks continuing to mount.” (Source: “OECD sees rising trade tensions and policy uncertainty further weakening global growth,” Organisation for Economic Co-operation and Development, September 19, 2019.)

Keep in mind, organizations like the OECD are generally optimistic in nature. If they are saying the world economy could be the slowest it has been in more than a decade, don’t take it lightly.

Why a Possible Global Recession Should Matter to Investors

Dear reader, I know that investors in the U.S. don’t necessarily care about the global economy, but it shouldn’t be ignored whatsoever. There are direct consequences to Americans.

Here’s one thing: the U.S. exports roughly $2.5 trillion worth of goods and services to the world economy. Won’t this number be reduced if a global recession becomes reality? It’s very likely. Don’t forget, exports directly have an impact on the economy.

This is not all; did you know that a lot of American companies that trade on the stock market do business outside of the U.S.? Here’s some perspective; in 2018, S&P 500 companies generated 42.9% of their sales from outside of the United States. (Source: “S&P 500 2018: Global Sales,” S&P Dow Jones Indices, last accessed October 1, 2019.)

Therefore, if a global recession comes into play, about $0.42 of every $1.00 of sales by S&P 500 companies could be on the line. If sales decline, profitability could take a hit. With this, these companies’ stock prices could tumble.

Back to the FedEx example, look at the chart below; it plots the FDX stock price performance. As the company showed concerns about global economic growth, FedEx stock price tumbled—and it continues to trend lower.

Chart courtesy of StockCharts.com

I will end with this: I see the global economy as a ticking time bomb at the moment.

If it slows down further, you could say goodbye to any growth in the U.S. economy as well. The stock market could fall severely too.

Related Articles