Minerva Wisdom Analysis
Led by Minerva, the team take a deeper look into stories that deserve more attention than the market gives them credit for.
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Led by Minerva, the team take a deeper look into stories that deserve more attention than the market gives them credit for.
The US manufacturing sector's woes deepened in February, with the Institute for Supply Management (ISM) Manufacturing PMI registering a dismal 47.8%. This marks the 16th consecutive month of contraction, raising concerns about the underlying health of the US economy. This data point, coupled with recent comments from Federal Reserve officials, fuels speculation about potential interest rate cuts in the coming months, a move likely to have a positive impact on 10-year US Treasuries.
The stage lights dim, casting long shadows over the once-booming Chinese economy. A chilling demographic truth lingers in the air – a rapidly shrinking population, echoing the haunting melody of Japan's past. As whispers of China's "Lost Decade" gain traction, a critical question resonates: Will China's stock market follow Japan's stagnant dance, or can it rewrite the script?
Act I: The Curtain Falls on Growth
China's demographic curtain rises on a vibrant scene – a young, abundant workforce fueling breakneck economic growth. But the script twists, revealing a declining birth rate and ageing population. By 2050, China's workforce is projected to shrink by 200 million, mirroring Japan's demographic decline decades earlier.
This population slowdown translates into a dampening demand for goods and services, potentially leading to economic stagnation.expand_more Just as an aging dancer struggles with intricate steps, China's once-agile economy may face similar challenges.
Act II: Echoes of Japan's Stagnant Symphony
Across the sea, the Japanese Nikkei index serves as a cautionary tale. Soaring to dizzying heights in the 1980s, it has remained largely stagnant since, trapped in a prolonged period of low growth and deflation. Academic research adds a chilling note, suggesting a correlation between declining populations and falling PE multiples, potentially amplifying the stock market woes.
The similarities are striking: aging populations, shrinking workforces, and subdued economic growth.expand_more Will China's stock market follow Japan's lead, or can it break free from this seemingly preordained script?