A new year traditionally begins with lots of hope and optimism, but thus far 2016 is taking a different tack. Since this new year began, however, the financial markets are looking less than optimistic, to say the least. Since the start of the new year the market has dropped dramatically, with worldwide losses now at over $2.5 trillion globally. According to market guru George Soros on Bloomberg, all this indicates a possible crisis, one that could reach the proportion of the economic meltdown of 2008.
Soros is a voice market watchers listen to, as this hugely successful hedge fund owner, who’s been working since the 1950s, is worth over $27 billion, due to the success of his investments.
In a recent talk in Sri Lanka, George Soros’ observed that much of the instability we are seeing now stems from the changes occurring in China. China is going through what might be called growing pains, as it changes from a manufacturing and investment based economy into one that is geared more towards service and consumerism. This change hasn’t been easy, and the yuan is now going through major losses in value, all of which are taking a huge toll on the international market.
Since the start of 2016, the plunges in the Chinese market have forced it to close for trading on several occasions. The losses were huge and there is no solution in sight right now.
The Chinese authorities are acting swiftly to stem the losses, with the People’s Bank of China lowering interest rates dramatically and even the Communist Party pledging to let go of controls on capital by 2020. The authorities are also putting a lot of money into the economy, but thus far none of these moves has helped significantly.
Soros advice at this time is for investors to move warily in the new year to avoid major losses. This doesn’t look to be a time for major risk taking, to say the least.