Is it 2008 again?

16 February 2016 8:28 pm

Global equity markets have been in turmoil between 29 December 2015 and 15 February 2016.

The Dow Jones last week plunged into a sea of red. True markets rallied this week but analysts said you have to get it in some perspective. Bad trade data from China, and the collapse of Japan’s GDP added to hopes of more central bank intervention which buoyed commodities prices.

All up, world equity market capitalisation has fallen by $14 trillion since May.

Every day, we are seeing the markets have recover and then fall the next day, up and down daily swings of significant sizes continue to occur.

But this year, more than any other that I remember, has had some worrying signs

Here are a few events since the beginning of 2016.

1. Shares in Italian banks have slumped amid fears they are about to collapse.

2. Fears that Deutsche Bank debt could turn it into the next Lehman Brothers.

3. Chinese indebtedness quadrupled between 2007 through to mid-2014, rising from $7 trillion to a staggering $28 trillion.

4. Japan has rolled out negative interest rates highlighting Tokyo’s lack of options to spur growth as global markets sputter.

5. The oil price has just moved up 5 per cent to $31 a barrel but it’s moving up and down every day, near 12 year lows.

6. The Baltic Dry Index, a measure of the health of world trade tracking ships carrying dry bulk commodities, has crashed to the lowest level since records began 30 years ago.

All of this raises the question of whether it’s 2008 all over again. The worry is we could be worse off. Cheap money has led to an explosion in debt, taken on by governments, households and companies – and despite the 2008 crisis being caused by too much debt, the levels have risen since then. Nervous times ahead.