Major Concerns for Investors Right Now

Global concerns that investors should be aware of before they leap into any future investments. Read,  understand and contribute.

Investors, Sit Up and Listen!

Following on from my previous post I feel the need to briefly discuss major global concerns that investors should be aware of and have an opinion on right now. I would encourage any readers to voice their opinions in the comments box below.

Christine Lagarde is the Managing Director of the IMF (International Monetary Fund). This basically means that she knows a thing or two about the Global Economy. Christine recently sited three major concerns for the global outlook at the moment.

Major Economic Concerns

Christine highlighted the following three issues:

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3. Slowdown in the rate of economic growth in China. Whilst China appears to have an incredible rate of growth, between 8% and 9%, this is actually a significant slowdown since the previous 3 decades in which they saw double digit growth. This could have large implications for global imports and exports, meaning that the rising middle class in China is not expanding as quickly as everyone had hoped. Investors may be forced to look elsewhere for new, and more rapid rates of growth. Examples include parts of Africa, Brazil, and Turkey.

2. The second major concern that she highlighted was the ever growing credit crisis in Europe and falling confidence. Please read my previous article on the Eurozone Crisis for more information. Essentially, a core part of Western Civilization is no longer the centre of growth and innovation in the world. The tide has shifted and the power comes from the East.

1. The biggest major concern in the world economy at the moment is the US fiscal Cliff. To put it simply, America is spending so much money (vastly more than they receive in taxes) that their level of debt is reaching alarming levels. Automatic tax rises and spending cuts come into action at the beginning of the coming year if nothing is done. Clearly action needs to be taken, and with the oncoming election in November the outlook for the future of the American Economy may all swing on the outcome of that election. Republicans want to avoid tax rises and to cut spending, whereas Democrats want spending cuts and tax rises. Regardless of the outcome, if America isn't careful they could see a vast slowdown in the rate of economic growth. This has implications for the whole world, particularly for us in England since America is our biggest export market.

A Further Investor Concern

Whilst Christine offered up several major Economic concerns, I would also argue that she missed out a couple of others:
  1. If there are any further problems in the Middle East, such as a war between Israel and Iran, this will have huge implications for the price of a barrel of oil. We could see oil rise to $150 a barrel or more! This affects costs in almost every industry all over the world.
  2. Food prices has been soaring over the past few decades as the population of the world has boomed. The next 50 years could see even greater price rises, unless there are huge innovations in food production. This is unlikely to happen.
Readers, are there any other major concerns for the global economy right now that investors should be aware of?

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alternative investments said...

And don't forget the crisis around Iran's nuclear program. We could wake up one morning and find that there's been an Israeli attack overnight, all hell has broken loose, and oil has shot up to $300/barrel.

Mr. Moneybanks said...

Yes I have mentioned that already. I think the middle east in general is a cause for concern. Sadly the world is still governed by the price of oil and it'll take some serious investment in alternative energies before that dissipates.