Stagnant economies, sagging corporate profits, plunging consumer confidence; there are plenty of reasons why stock prices are under pressure.
But the biggest fundamental reason behind the global stock market decline is simple: The world’s biggest investors are selling.
Sovereign-wealth funds (SWFs) worldwide held more than $7 trillion in total assets at the end of 2015, with just under half that amount ($3.04 trillion) invested in listed stocks.
Many of the largest SWFs are based in oil-exporting countries, including Norway’s Government Pension Fund, with assets of $825 billion; Abu Dhabi ($773 billion); and Saudi Arabia ($632 billion). Plus, China’s SWFs own assets of more than $1.2 trillion.
What do these funds all have in common? They’re under financial distress thanks to:
- Plunging oil prices cutting into their incomes, and …
- In China’s case, a plunging currency.
The result: These funds have turned into massive net sellers of equities, putting added pressure on global stock markets.
In 2015, SWFs sold $213.4 billion in equities, according to a report from the Sovereign Wealth Fund Institute, but SWF stock-selling is expected to nearly double this year, to $404.3 billion.
HUGE Investment Opportunities in Oil!
The International Energy Agency (IEA) just announced that demand is about to rise a whopping 1.1 million barrels per day, a 57% surge over last year! That will soon drive energy stocks like these into the stratosphere. Don’t miss the greatest oil and energy fire sale in 30 years! Click here for more information!
For SWFs in oil-rich nations, the reason for the fire-sale of stocks is obvious: Oil prices have plunged 70% since 2014, cutting into government revenues and putting national finances and currencies in distress.
Saudi Arabia’s net foreign assets dropped by more than $19 billion in December 2015 alone, as the kingdom desperately tries to defend its currency amid plunging oil prices.
The Norwegian krone has lost 22% of its value against the buck since mid-2014. Worse, the krone is even dropping in value against the beleaguered euro… down 12% over the same period!
As a result, Norway’s SWF, which hasn’t made a withdrawal since the fund got its start in 1996, plans to sell $9.3 billion worth of assets this year.
But China is the real wild card when it comes to SWF stock sales.
Oil prices aren’t the problem here, but lack of confidence in China’s financial system, and its currency, are the culprits.
China’s Shanghai Composite stock index crashed nearly 44% from the peak in 2015. The reverse-wealth effect of plunging share prices isn’t as great as you might think because there’s not a lot of money (as a percentage of GDP) invested in Chinese stocks compared with, say the U.S. or Europe, but it has triggered a loss of confidence in China’s ability to manage its slowing economy.
Guess who’s about to go bankrupt in America? The man who accurately predicted the fall of Fannie Mae, Freddie Mac, General Motors, and the oil industry has just issued his next prediction. He says, “The next bankruptcy in America will be even bigger than those I’ve identified in the past… This looming bankruptcy will threaten your way of life, whether you own any investments related to it or not.” Learn the shocking answer and how to prepare here.
Flows of private-direct investment into China have dried up and its currency, the yuan, is under attack as the People’s Bank tries to pull off the tricky task of a “managed” currency devaluation.
Over the past three months alone, China has burned through $300 billion of its foreign-exchange reserves trying to support the yuan from plunging even more.
Add it all up and you can see the potential for massive “margin calls” on global SWFs worldwide will only add to the selling pressure in global stock markets.
P.S. Boris and Kathy JUST confirmed that they’re about to get the green light on two of the trades they’re most excited about for 2016!
The first trade is a play on a currency that is being crushed under massive, unpayable debts, a slowing economy and threats of terrorism.
The second trade is a global play on the political and economic chaos we’re seeing in Asia, the Middle East and Europe right now.
The green light could come at any moment … but only to members of their Global Currency Investor service.