With headwinds gathering strength, investors wonder when does the bear market start?
You have read about the economic mess in Europe. The anticipated inflation of the Eurozone economy turned out to be a no-show, and now the region is experiencing deflation. On January 7, Eurostat reported that the Eurozone’s annual inflation rate during the month of December was negative 0.2 percent. Because America relies on Europe to buy its exports, declining sales to European countries should have an impact on those closely-watched, quarterly earnings reports. Once the impact hits our exporters, the length of the slowdown could remain unknown, scaring investors away from those stocks.
The Swiss shocker on Thursday also casts a longer shadow on Europe as the European Central Bank prepares to meet on Thursday, January 22nd and that will be followed by Greek elections on the 25th.
One of the most significant developments hurting the European economy is the economic slowdown in China. As the world’s second-largest economy, China is a major importer of materials. The European mining sector is feeling the pain – as is that of Australia, one of China’s most important suppliers of raw materials.
Here in the United States, we are already seeing the impact of China’s slowdown on our own industries. Copper prices are in the basement and stocks for companies which produce copper are sinking. Cheap fuel prices are making it cheaper to produce the orange metal, causing a glut in the market.
Speaking of gluts and fuel prices, crude oil has become so cheap that it is actually bringing harm to the American economy. Although everyone initially welcomed lower prices at the pump, oil has fallen so low that it has created a contagious decline for other businesses.
Companies which manufacture the machinery used in oil extraction and refining are experiencing order cancellations. The railroad industry is making less money because oil shipments constitute a significant part of their business. Let’s not forget about the companies which produce tank cars.
