Category: Hedge Funds

Economics

Otaviano Canuto on Commodity Price Cycles

Author ByCFI.co Blogger

Otaviano Canuto, Policy Center for the New South

Commodity prices go through extended periods during which prices are well above or below their long-term price trend. The upswing phase in super cycles results from a lag between unexpected, persistent, and upward trends in commodity demand, matched with a typically slow-moving supply. Eventually, as adequate supply becomes available and demand growth slows, the cycle enters a downswing phase.

The latest super-cycle of commodity prices, starting in the mid-90s, reaching a peak by the time of the global financial crisis, and getting to the bottom by 2015, can be seen as associated to the developments of globalization that we have already dealt with in this series. More recently, some analysts have spoken that we might be on the verge of a new cycle, super-cycle or not.

Hedge Funds

Coronavirus: investors should avoid knee-jerk reactions

Author ByCFI.co Blogger

Coronavirus is the number one threat to financial markets currently – but most investors should avoid knee-jerk reactions, affirms the CEO of one of the world’s largest independent financial advisory organizations.

Nigel Green, deVere Group chief executive and founder, is speaking out as global stock markets are rattled on fears of the potentially deadly Sars-like virus triggering major sell-offs.

The death toll has now risen to 81 and almost 3,000 people have been confirmed as infected, with 44 cases having been detected outside China, where it originated.

On Monday, the composite European Stoxx 600 fell 1.7% at the open, London’s FTSE 100 dropped 1.6%, while Germany’s Dax was 1.7% lower.  The slump followed a similarly dramatic decline in Asia overnight. The Shanghai Composite fell 2.7%, the Hong Kong Hang Seng lost 1.1%, and Japan’s Nikkei dropped 2%.

Mr Green says: “The Coronavirus is the number one threat to financial markets currently as global investors are becoming jittery on the uncertainty.

“But whilst this health crisis will inevitably hit some sectors, such as travel and retail, most investors who have a properly diversified portfolio should avoid knee-jerk reactions.  History teaches us that most issues of this kind have a short-term impact on stock markets.”

He continues: “Most investors should monitor the situation with their financial adviser and sit tight at present. But if it is still escalating next week, with much higher casualty rates, a more defensive approach might be necessary. 

“However, the cost and effort of making such a switch means you do not do it lightly, and more evidence is needed that the virus does pose a medium to long term risk to China and the global economy.”

Mr Green goes on to say: “But that said, this should serve as a wake-up call to all investors to ensure their portfolio is well-diversified across asset classes, regions, sectors, even currencies. 

“This is the best way to mitigate risks and the best way to be well-placed to take advantage of the opportunities when they occur.”

The deVere CEO concludes: “Stock markets tend to bottom with the peak in new cases during a public health issue of this kind, before rebounding.

Coronavirus is the number one threat to financial markets currently – but most investors should avoid knee-jerk reactions, affirms the CEO of one of the world’s largest independent financial advisory organizations.

Nigel Green, deVere Group chief executive and founder, is speaking out as global stock markets are rattled on fears of the potentially deadly Sars-like virus triggering major sell-offs.

The death toll has now risen to 81 and almost 3,000 people have been confirmed as infected, with 44 cases having been detected outside China, where it originated.

On Monday, the composite European Stoxx 600 fell 1.7% at the open, London’s FTSE 100 dropped 1.6%, while Germany’s Dax was 1.7% lower.  The slump followed a similarly dramatic decline in Asia overnight. The Shanghai Composite fell 2.7%, the Hong Kong Hang Seng lost 1.1%, and Japan’s Nikkei dropped 2%.

Mr Green says: “The Coronavirus is the number one threat to financial markets currently as global investors are becoming jittery on the uncertainty.

“But whilst this health crisis will inevitably hit some sectors, such as travel and retail, most investors who have a properly diversified portfolio should avoid knee-jerk reactions.  History teaches us that most issues of this kind have a short-term impact on stock markets.”

He continues: “Most investors should monitor the situation with their financial adviser and sit tight at present. But if it is still escalating next week, with much higher casualty rates, a more defensive approach might be necessary. 

“However, the cost and effort of making such a switch means you do not do it lightly, and more evidence is needed that the virus does pose a medium to long term risk to China and the global economy.”

Mr Green goes on to say: “But that said, this should serve as a wake-up call to all investors to ensure their portfolio is well-diversified across asset classes, regions, sectors, even currencies. 

“This is the best way to mitigate risks and the best way to be well-placed to take advantage of the opportunities when they occur.”

The deVere CEO concludes: “Stock markets tend to bottom with the peak in new cases during a public health issue of this kind, before rebounding.

“This is a worrying and serious situation and investors must be vigilant. They should remain properly diversified and remain in the market.”

“This is a worrying and serious situation and investors must be vigilant. They should remain properly diversified and remain in the market.”