Discerning which way the global economic 'pendulum' is swinging

IN world markets and across the global economy, dynamics are constantly shifting back and forth like pendulums, favouring one country or sector, then another. The forces driving economic "pendulums" are indefinite, but while it may be hard to pinpoint exactly where each market will wind up, we may know the direction some are heading.

Looking at growth, we see that the pendulum is swinging away from the world's second-largest economy to developed markets as 2016 presents itself as a year of growth rebalancing. Growth has faltered for China and other emerging markets, and will slow further when the excesses from the boom years begin to be excised. Emerging markets that benefited from China's investment boom will see 2016 as another year of slower growth, unwinding credit and capacity excesses.

Faltering demand from China and excess supply amassed during the commodity super-cycle will last for some time, possibly even years, since producers will keep producing as long as prices are above their variable cost of production, a recipe for persistent oversupply in excess of demand. But a more normal commodity cycle will eventually assert itself, driven by cyclical changes in supply and demand, and commodities will likely not see new inflation-adjusted record high prices any time soon.