Although I don't want the title of "Singapore's Resident Bear", I seemed to have earned this title for being too cautious. However, of late I have noticed people asking me whether I am too bullish in thinking that markets will see their worst at the end of Q2-2009 and to start accumulatiing selectively into Q3/Q4-2009. This is a first for me and could be a good signal, ie the last bull must become a bear before markets can bottom.
I just received an email from a fund manager this morning telling me that Stephen Roach of Morgan Stanley now suggesting that the US economy will have two more lean years into 2010/2011 and then any rally would be premature given the growing magnitude of the problem. The main reason for this more negative thinking is that consumption is 70% of the US economy and this has all but collapsed because of the credit and banking crisis - there is also massive destruction of savings in the US from the toxic assets which needs to be rebuilt before consumption can return to normal levels. The charts below on quarterly US GDP growth and US unemployment going back to 1947 tell or show that the worst is yet to come ! ie Quarterly GDP growth in the US has hit negative double digit before and unemployment has also gone to 10-12% in the US before compared to 7.6% now - so more dreadful quarters ahead.
Our PM is correct in saying that Asia is better placed this time round compared to the US and EU but Asia is still not a consumption economic region yet - it will take time to shift. China's economy is only 15-16% consumption.....worst hit will be open and export oriented economies like Singapore, Hong Kong and to a lesser extent Taiwan and Korea.
US Quarterly GDP growth(%)
US Unemployment rate (%)
Source: NRA Capital - Kevin’s Blog