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Thesis for Continuation of Those and Other Current Trends By Tom Stevenson4:44PM BST 01 Aug 2015 Tom Stevenson is an investment director at Fidelity Worldwide Investment. The views expressed are his own. He tweets at @tomstevenson63. Excerpts from http://www.telegraph.co.uk/finance/economics/11778011/Commodities-rout-brings-global-winners-and-losers.html Commodities rout brings global winners and losers The sell-off in commodities is terrible news for emerging market countries which depend on high resource prices The commodity slump is important because, unlike the Greek debt negotiations and Shanghai’s bursting equity bubble, its impact is felt throughout the global economy. Greece is a rounding error in worldwide terms while the Chinese stock market remains largely sealed off from the rest of the world. Last month’s slide in oil, industrial metals and agriculture speaks to a broader concern – that the long slow recovery from the financial crisis is far from secure. Although the past month has seen an acceleration of the slide in commodity prices, it is actually part of a secular shift that may have barely begun. Commodities boomed for a decade from 2001. It is unrealistic to expect the correction to be over in just four years. This is good for some countries, sectors and asset classes and catastrophic for others. No wonder Janet Yellen is leaving her options open. Companies are belatedly acknowledging that they face a prolonged downturn in prices and they are finally facing up to the consequences. That’s bad news for commodity producers and companies dependent on investment in the sector. It’s also terrible news for emerging market countries whose economies and current accounts depend on high resource prices. Between the mid-1970s and the mid-1990s, inflation-adjusted earnings for basic resources, industrials, chemicals, oil services and machinery companies went nowhere. It is hard to see why this pattern should not be repeated. But for the commodity consuming parts of the economy, a slide in the cost of resources is just another tail-wind to add to falling unemployment, rising wages and persistently low inflation. This is why the US stock market trades at a premium to the rest of the world and why resource-hungry Japan continues to look so interesting. For many companies and individuals, reduced input prices and lower transport and heating costs are a positive that will keep a lid on inflation and give the central banks on both sides of the Atlantic pause for thought. It’s not too late to get on the right side of this trade. http://www.telegraph.co.uk/finance/economics/11778011/Commodities-rout-brings-global-winners-and-losers.html
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By Tom Stevenson4:44PM BST 01 Aug 2015
Tom Stevenson is an investment director at Fidelity Worldwide Investment. The views expressed are his own. He tweets at @tomstevenson63.
Excerpts from http://www.telegraph.co.uk/finance/economics/11778011/Commodities-rout-brings-global-winners-and-losers.html
Commodities rout brings global winners and losers
The sell-off in commodities is terrible news for emerging market countries which depend on high resource prices
The commodity slump is important because, unlike the Greek debt negotiations and Shanghai’s bursting equity bubble, its impact is felt throughout the global economy. Greece is a rounding error in worldwide terms while the Chinese stock market remains largely sealed off from the rest of the world. Last month’s slide in oil, industrial metals and agriculture speaks to a broader concern – that the long slow recovery from the financial crisis is far from secure.
Although the past month has seen an acceleration of the slide in commodity prices, it is actually part of a secular shift that may have barely begun. Commodities boomed for a decade from 2001. It is unrealistic to expect the correction to be over in just four years. This is good for some countries, sectors and asset classes and catastrophic for others. No wonder Janet Yellen is leaving her options open.
Companies are belatedly acknowledging that they face a prolonged downturn in prices and they are finally facing up to the consequences.
That’s bad news for commodity producers and companies dependent on investment in the sector. It’s also terrible news for emerging market countries whose economies and current accounts depend on high resource prices. Between the mid-1970s and the mid-1990s, inflation-adjusted earnings for basic resources, industrials, chemicals, oil services and machinery companies went nowhere. It is hard to see why this pattern should not be repeated.
But for the commodity consuming parts of the economy, a slide in the cost of resources is just another tail-wind to add to falling unemployment, rising wages and persistently low inflation. This is why the US stock market trades at a premium to the rest of the world and why resource-hungry Japan continues to look so interesting.
For many companies and individuals, reduced input prices and lower transport and heating costs are a positive that will keep a lid on inflation and give the central banks on both sides of the Atlantic pause for thought. It’s not too late to get on the right side of this trade.
http://www.telegraph.co.uk/finance/economics/11778011/Commodities-rout-brings-global-winners-and-losers.html