What is next?

PICKING where a stock market is going to head is a science no one will perfect.

Some people are good at predicting and stock picking, and the only way anyone will have a perfect record is if he or she has the benefit of manipulation and insider trading.

The question before everyone dealing with inflation worry is just how bad is the horizon going to be?

Inflation concerns are surely a big worry and with price rises still running hot and western governments warning of elevated levels of inflation to remain for the foreseeable future, it is going to take some time before prices cool off.

Pouring more stimulus money into assisting an economic slowdown will surely be counter intuitive to capping on inflationary pressure but the real elephant in the room is not going to be inflation but the economic slowdown most people are worried about.

Images of the devastating drought in China and Europe will lead to an economic shock.

With hydroelectricity potential evaporating from the high heat, that is leading to factory closedowns and supply shocks in both China and Europe.

For China, that shock is akin to the zero-covid shutdowns that brought China’s economy to barely register a growth in the second quarter. But with grouses over the property implosion in China and now forced factory closures because of insufficient power, this is likely to compound the economic problems in the third quarter.

Then there is the price of electricity and heating in Europe as winter rolls in. The lack of enough gas is causing electricity prices to skyrocket in Europe, and in particular Germany.

The cost crunch can likely add to the inflation pressures and lead to a lot of businesses experiencing cost pressures like never before. If energy costs were 10% of total production costs, that is going to balloon to levels never see before.

But what does that mean for Malaysia? The economic problems of China and the West are going to cause issues for manufacturers and exporters. As clients in those markets suffer production bottlenecks and cost pressures, that will also translate to business pressures here.

The outlook is certainly cloudy over the next couple of quarters and how will that translate into 2023 will be worth watching for stock market aficionados.