What started in January as mainly China-based worries has clearly broadened back out to concerns about global growth. At its core, there are five fault lines running through the global economy. The first is the malaise in emerging markets that began earlier this decade, with Brazil and Russia in recession. The second is the ongoing concern about China and its intentions regarding the value of the Renminbi. The third is the collapse in commodity/oil prices which is weighing on energy producers and hence business investment, credit markets and driving selling by sovereign wealth funds. The fourth is the strong $US which has made the fall in the oil price worse, raised debt servicing concerns in the emerging world and weighed on the US economy. Finally, there is fear itself as financial market turmoil drives fears that this will cause a global recession which in turn is reinforcing selling pressure and pushing share markets even lower. Worries about banks – and their exposure to higher bad debts if there's a recession – seem to be at the centre of this. (VIEW LINK)
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