Santa leaves investors only lumps of coal as markets have their worst start since 1896

Bob Baur

Angst about China has seen the worst open to markets since records began, with a higher than expected contraction in manufacturing and weaker than expected currency fix versus the U.S dollar, sending markets into a selling frenzy.

Principal Global Investors have released their latest economic insights paper by Chief Global Economist, Bob Baur, analysing the good, the bad and the ugly of a large devaluation of the yuan.

Key insights include:

• Voluntary or not, a large devaluation by China will see brutal deflation around the world, reign in global job growth, bring notable declines to equity markets and crush international commerce
• Current market turmoil does not necessarily point to a big devaluation rather a market correction, but does highlight the risks in emerging markets as China deals with the aftermath of their 15-year boom in investment
• Principal Global Investors forecast two to three Fed rate hikes in 2016, as minutes of the last Federal Reserve Meeting suggest that the pace of rate hikes will be gradual enough to allow actual inflation to emerge

To read Insights in a minute, click here.
To read the full report, click here.