What the signs say about 2019
019 is the Year of the Earth Pig, in the Chinese Astrological calendar. The Pig is supposed to be a sign of material wealth and prosperity, with folks born under this astral sign supposedly tending to be on the materialistic side.
As we enter 2019, however, the signs of prosperity seem to be counterindicative. The global stock markets are in decline and the usual engine of the global markets, the New York Stock Exchange appears to be headed back to the zone where it was when President Trump took over, i.e. in the high 19,000s. That darling of stocks, Apple, has announced that it will fail to meet its sales targets, principally blaming weak Chinese demand.
The penetration of the stock market in the Philippines by population, is still very low with less than 1% of our population involved in any form of stock market investment. So therefore, Juan de la Cruz trudges on, more concerned about his daily bread than economic developments in some far off land.
While the stock market performance is of minimal consequence to our economy and to Juan de la Cruz, we will be impacted by developments here and abroad that will influence our domestic price levels, employment and livelihood opportunities.
2019 will be a year marked by uncertainties. The global economy is already in retreat, but not yet recession and no one knows how deep the impact will be of the trade wars and of the fluid situation in the Middle East where the mere hint of trouble could cause the climb of oil prices which would impact us once again. Suffice it to say that, as things are now, the global demand for oil products will remain at least flat, and more probably will see more signs of retreating rather than rising. Tensions remain between nations, particularly in the Middle East and no one can say when a flashpoint will be ignited. Again, the operative word is uncertainty.
Domestically, the implementation of TRAIN 2 may again impact on inflation should oil prices rise this year above the benchmark $80 per barrel of crude. While common sense dictates that with the global economic slowdown, prices will remain at their current level with a tendency for further retreat, no one can be certain of the levels staying that way.
However, with more revenues flowing from TRAIN 2, the continued implementation of the “Build, Build, Build” program is at least secured for 2019 with its positive effects on the multiplier effect and the accelerator effect on the economy. In addition, the government will continue to pay its teachers, soldiers and other employees better than in years past. As it stands now, teachers in the private schools and colleges are migrating to the public schools due to better pay.
Government will also spend more on national defense, as this aspect has been long neglected, leading to our being bullied by some of our neighbors and losing our territorial rights guaranteed by international law. This aspect of spending, when it comes to purchasing military hardware has zero effect on economic growth unless it results in more spending on military manpower. Nonetheless, it will be important in protecting our sovereignty.
The May elections will again cause a spike in monetary velocity as candidates spend for their respective campaigns. Short lived employment opportunities will arise as candidates hire to man their campaign apparatus, as crowd haulers, as watchers and other assorted jobs that come with an election campaign.
The onset of the El Niño weather phenomena signals a period of near drought conditions lasting perhaps to the end of March, 2019 with possible spills into April and May. The warm weather associated with the El Niño may impact on the agriculture harvests of the first quarter causing a rise in food prices and from there a rise in inflation. Trouble is, the El Niño effect is almost normally followed by an assault of typhoons generated from the warm air sucking up moisture from the ocean. It will not be unreasonable to expect that the remaining nine months of 2019 will be plagued by typhoons, which also impact on our food production. Should this occur, then there will be a period when rice and vegetable products will rise due to lack or scarcity of supply.
At the end of the day, with developments as volatile and unpredictable as they are expected to be, it is good to remain liquid. 2019 may not be a time to embark on entrepreneurial ventures where the payback horizon is longer than one year.
Predictably, with all the uncertainties surrounding 2019, gold prices have risen, and so too will the price of most precious metals, as silver. Keeping liquid may be a good strategy to capture bargains as they appear on the horizon. It is not the time for investing school, rent or grocery money to be invested in the stock market. Furthermore, with the global economy weakening, it may result in less demand for our greatest exports: the OFWs and OCWs. This could translate to weaker demand in our economy as less remittances enter the system.
Perhaps therein lies the secret of the Year of the Pig: Opportunities will pop-up amid the uncertainty for those who choose to remain liquid and are prepared to ride out the uncertainty.