Will Recession Occur In 2016?

By | January 10, 2016

Will recession occur in 2016? What will you do?

In my personal opinion, the recession has started, but the authorities from all over the world will not declare it until end Mar or end June 2016. As the recession is defined as negative growth over the past two consecutive quarters.

 

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4th Jan and 7th Jan 2016 being the 1st day and 4th day of the year suffered 7% drop in Hong Kong index and almost 10% in Shanghai index and the trades were halt twice given the intervention by the Chinese authorities. What happens next was the world wide spread of stock index collapsed throughout the world. What does it mean for you and me as individuals? It will mean less likely to borrow money from the banks as the central banks were told to tighten their credit borrowing given the incident happened on 4th and 7th Jan 2016.

Next, it will also likely indicate that asset prices of properties will face huge headwind in the coming year as there will be less credit to borrow given the tightening policy from central banks. Also, FedChairman, Janet Yellen may increase another few rounds of interest rates which will put additional pressure onto property prices.

If the economy confirmed to be shrinking and partly due to consumer’s lowering their spend. Likely corporate companies will suffer another year of poor performance. Obviously, the top management will start to layoff people once the quarterly results are out and we have to prepare for the worst.

 

Should you consider to continue as employee?

If 2016 confirms to be a impetus of recessionary years to come then one has to consider the various options:

  • Hang on to the job.
  • Look for brand new thing to do.
  • Rely on your partner or spouse to support the family.
  • Consider entrepreneur? There is no better time than this.

Typically, every major recession will encounter massive job losses and usually government jobs will likely to be secured during bad times. If you know you are suitable to be an employee, and you happen to be in government job then chances for you to survive this economic storm should be alright. While the rest of us who are either entrepreneur or working for non-government jobs then it will be survival fittest. There is no right or wrong answer to this but one should assess the situation and determine what’s best during that moment. I do know that entrepreneurs create jobs and boost the economy.

 

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Will property continue to be safe haven?

It is interesting when I hear people talking about property prices is the place for investment. There is no doubt that property prices between 2010 – 2014/5 especially in Asia has boom since the economic crisis in 2008 and across Asia, the property prices have risen around 50% to 100% as compared to 2008! In view of this, most Asians believe that property prices should restore, recover and even rise much higher after this potential 2016 crisis! We are too naive to think that property prices will recover immediately just the experience we went during 2008 – 2009. Thus Asians especially those who benefitted from the property boom during the last few years thought they found the magic formula and continue to believe properties will be able to withstand economic crisis. By this I mean, they know that property prices will drop for the potential crisis but they also believe that property prices will recover within the next 2 years and they gave the example of 2008. In my heart, I hope they will read more information outside of their comfort zone as they clearly not aware that next quantitative easing will not be as effective as before.

Many Asians failed to realise that recovery was mainly due to quantitive easing or put it bluntly print money. Had it not been helicopter Ben then the recovery will not be that quick and in fact, we almost went to the new depression. Right now, given the low-interest rate, I truly doubt printing money can have a positive effect for the economy.

I am referring in particular to Singapore and Hong Kong market and clearly many people had forgotten the experience from 1996-1997 where bankers were chasing after the mortgagors when the property values gone into negative territory. Will this happen again in 2016-2018? Maybe not but one should not ignore the fact that it did happen previously.

Over in USA, I believe the US property will soften as well but the situation will not be as bad as some of the asian countries where the property prices in Asia have escalated to a level that is beyond reach to average salary income earner.

 

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What should we do to prepare ourselves for the coming crisis?

In fact, I have been busy watching the price movements of rental flats and shops. I want to have a feel on the ground to inform me how bad the situation can go. Also I believe this coming crisis will be unlike 2008 where it will not recover so soon, as quantitive easing is no longer as effective as before. Below are some of the things I plan to do to prepare for the coming crisis.

  • Take stock in what you have and ensure that you are able to survive throughout the crisis so expenses must be controlled.
  • Be active on the lookout for desperate deals as there will be opportunities. Don’t jump into the first opportunity, wait and see how it develops. Be patient and also get ready to strike once you have studied the situation. I plan to expand my business during downturn as I am able to get much lower rental retail shops in good location. During good times, my business will not be able to afford but bad times will allow me to put foothold in strategic location and possibly expand my market share.
  • Always stay vigilant in what the government plans to do. Will the government plan to do more free trade with other countries or will they do the opposite and set some trade barriers with certain countries. Different actions taken by the government will yield different results as some businesses will thrive when their currencies are strengthened – import based while other businesses will thrive when their currencies are weakened – export based industries.
  • Buy physical gold and silver if you don’t have other plans as physical (not paper) gold and silver were used for transactions for thousands of years.

Don’t stay status quo and wait for the things to come! It won’t happen, you have to grab your opportunity.

As for me, I am an advocate of entrepreneurship versus employment. I believe taking control of your own life not let others controlling your life. Don’t live under someone else’s life!

In conclusion, don’t think that previous method works well for you, and you will automatically deduce that it will work again for this round. Every situation is different and one should not take things for granted and assume buying property will always be the safe haven against economic crisis.

I planned to invest my time into online business as I believe some of the online business will be affected during economic crisis but not all of them as some of them may be a boom time. During bad times, I believe there will be more people losing their jobs and they will be looking into ways of how to earn money and certainly one should not miss online arena.

Interested to venture into online business. Do visit this post.

Lastly not forgetting that there is this search keyword tool that I used to help me in getting some of my posts into page one ranking on Google.

If you like this post, kindly support by “LIKE” in social media.

Thanks,

Stanley

16 thoughts on “Will Recession Occur In 2016?

  1. Edwin

    Very interesting and scary post. After reading the post it puts a different perspective on the job market and real estate market as well.

    Entrepreneurs are being born everyday and I think it is driven by the economy and real estate markets. You clearly get your point across.

    I have taken the challenge of starting an online business. This post reminds me why and keeps me motivated to succeed.

    Thanks

    Reply
    1. Stanley

      Edwin,

      It is scary but factual. I would rather face the fact than hide from it. I shared my sentiments to a group of Singapore delegates back 6 months ago. No one believed in me as I was the only one that says China will have a serious turmoil in the coming months. Now, it is coming to past and we have to learn from the history and how to protect ourselves and at the same time take advantage of the situation to prosper if you have guts but remember to take calculated risks.

      Reply
  2. Riaz Shah

    Really timely article here Stanley,
    You did a thorough review on the stats as well, its always very depressing to hear news such as this. Before we reached 2016, everyone here in Malaysia knew already that hoping is pointless as the economy here is already dropping down like never before.

    Companies close down and because of that, we need to take charge and be in control of our own life. Creating a business of our own is the way to go and I’m glad you totally agree on that. Do keep writing my friend, your articles always very interesting!

    Reply
    1. Stanley

      Riaz,

      Thanks for the encouragement. Malaysians too are very optimistic in 2010 – 2014. I was in Malaysia few years ago and i was worried when so many of them believe that properties will continue to boom. No matter how hard I tried to explain to them about central bankers print money hoping to keep asset prices inflated but once it is no longer effective then deflation will arise and it will wipe out a lot of wealth. Yes, starting on your own is the one of the best way to go. Take care.

      Reply
  3. Tyler Redlev

    It is true that world is in economically, and not only economically, in a bad shape for a while.

    Also the drop on oil prices has put the energy industry in a depressive position. But it can’t go on like this. Something needs to change and balance the scale.

    The right time for entrepreuneurship is everytime. In my opinion it is always the best way to follow

    Reply
    1. Stanley

      Tyler,

      Oil prices depressed back 1.5 yrs ago and people thought it was a good news as consumers are able to save money. Therefore, the consumers will spend the extras onto other sectors. However, it turned out that consumers are merely saving the money and unwilling to spend on retail so it has become a lose-lose situation for everyone. Yes, I believe eventually it will revert. Will it be like 2008 and the economy will revert within 1 – 2 yrs? Seriously, I doubt it. As Fedchair does not have the bullets of high or mid interests rate to reduce down to zero. Right now, the interest rates is already close to zero and Fedchair can print money or quantitive easing but it has little effect as compare to 2008 since the interests rate is already so low. They have to find other ways to boost the economy or inflate it. Looking at the situation, chances of deflation is very high and I believe this recession will last much longer than 2008.

      Reply
  4. Graham

    It definitely seems like there would be some kind of recession in this new year. What with the crisis that happened before the election. But I think you also ought to mention diversifying your assets. Such as in real estate, cash, bonds, a lot of other financial aids. Because there is no one rule that says you have to invest entirely in the stock market alone.

    Reply
    1. Stanley

      Graham,

      I dont really like the word diversifying as it actually means splitting your available cash across different places. I like to strategically place my cards in opportunities and strike it when the price and time is right for me. If I split my cash via diversification then I may not have enough cash to certain things and I will be stuck with only handful or cheaper stuff. That is my personal opinion. Take advantage of bad times and grab the opportunity when you seek. Hope this help.

      Reply
  5. Boniface

    Hi Stanley
    That’s a nice post and one that is quite informative and thus very helpful to us readers when seeking quality information about future economic times of the world and how to get prepared. Thanks for alerting me beforehand! I’ll put more effort online.
    Thanks again for your informative post and all the best in your online endeavors for 2016.

    Reply
    1. Stanley

      Boniface,

      I am just merely stating the facts and based on what I see and hear. I dont really listen to what the TV or “experts” have to say as i learned from my experience, it is better to see from ground level and taste it yourself. There are many empty residential units in China for quite a number of years. I believe the residential supply glut will hurt China badly and it will spread across to the rest of the world.

      Reply
  6. Justin

    Good article and insights. The stock market is, and always will, the leading economic indicator. I’ve opened up some positions in bearish ultra ETFs (those that move twice the move of an index, but in the opposite direction) and began doing so when the Asian markets sent a ripple through global markets in mid August.

    The bull market has been going strong and the rule of 7 is in play. The current bull market started March ’09 and is getting a bit “long in the tooth”. I think recession, at least in the USA is still about a year out, but the market will take a hit long before the economy follows suite.

    To be honest, we don’t even know what stage the economy is in because it has been deflated for so long via quantitative easing. We may be in a recession now, just artificially propped up by the cheap price of Money.
    Great read thanks for the article.

    Reply
    1. Stanley

      Justin,
      Good for you to open bearish ETF. You must be in positive territory. Yes, the artificial bull market started in 2009 and asset prices have been inflated for quite sometime until 2014 where oil price start to decline together with other commodities. I believe the commodity prices may be the leading indicator for all other sectors down the road. Watch out for gold and silver as it may rebound if the people start to lose faith in currencies. Happy for you to be in positive position. Good luck.

      Reply
  7. Luke

    The markets have definitely been a little sluggish, we could see an official recession in 2016. I really like that you mentioned entrepreneurship because it really is the best time in history to start a company. There are so many resources that you can start a company is so little capital.

    Reply
    1. Stanley

      Yes, this is the best time to be on your own as we truly see the decline of industrialization. Those who refuse to change with the trend will likely die with the trend. We cannot go against the huge tide that is coming. Truly internet has changed a lot of things we do and similarly for businesses as well.

      Reply
  8. Norman Tay

    Well, there is the saying that the best time to start a business is during the recession. I think Stanley is pretty much spot on about the coming recession… if its not already here. What is more worrying is the perpetual low interest rate and all the quantitative easing that has been happening since 2010 was not exactly helpful.

    Reply
    1. Stanley

      Norman,

      Very true that QE will do more damage down the road and it is not helpful in the mid to long term. in fact, it will only cause more people to riot on the streets given the wide disparity between the rich and poor. A looming social unrest is brewing and I am afraid peaceful days will be short lived.

      Reply

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