3 Warning Signs for the Global Economy

## Global Economy on the Brink of a Slowdown

Investors, take heed. The global economy is exhibiting signs of strain. Indicators are flashing red and a slowdown may be imminent. Should this global deceleration occur, anticipate heightened volatility in financial markets, potentially affecting your portfolio.

### What Really Is Happening?

To understand where the global economy is heading, focus on certain indicators—specifically oil prices, copper prices, and shipping rates.

Secure relevant data for *oil prices* from [world oil prices](https://www.investing.com/commodities/crude-oil). For *copper prices*, the [London Metal Exchange](https://www.lme.com/) is another reliable resource.

These indicators have historically been effective predictors of global economic trends. They often flash warnings before a global growth slowdown.

### Copper Prices Tumbling

Looking first at copper prices, the red metal’s behaviour is illuminating. Copper is essential across many global industries. If copper prices fall, it’s a strong signal that industrial demand is waning, suggesting the global economy is starting to turn downwards.

From their peak in early 2024, copper prices have dropped over 20%. Examining trend indicators such as the 50-day moving average (MA) and the 200-day MA, we see they predict further declines.

### Shipping Rates Drop by 40%

Next, let’s consider the Baltic Dry Index (BDI). This index tracks the prices for shipping dry bulk commodities such as grain, metal, and coal. The BDI is also a significant indicator of the global economy’s health.

If the BDI rises, it signals growing demand in the global economy. Conversely, a fall in the BDI is concerning as it suggests a potential stall in global economic growth.

Since late 2023, the BDI has dropped over 40%. This decline starkly indicates plummeting demand in the world economy. Further back, the index is down roughly 65% from its 2021 highs.

Historically, sharp declines in the BDI have preceded weaknesses in the global economy. Will this pattern repeat itself?

### Oil Drops Even with War Odds High

The last crucial indicator is oil prices. Oil has forecasted every major global economic slowdown. A drop in oil prices, especially steep ones, should not be taken lightly.

Looking at West Texas Intermediate Crude (WTIC) prices since late 2023, we notice a downward trend that has recently gained momentum. With both the 50-day MA and the 200-day MA signaling bearish sentiment, oil prices continue to fall.

Interestingly, oil prices are dropping despite elevated odds of conflict in the Middle East. This anomaly may indicate that the global economy is in poor health and deteriorating.

### What Happens as the Global Economy Slows Down?

Dear reader, it’s essential to consider the global economy when making investment decisions. In our interconnected world, an event in one country affects economies everywhere.

If the global economy indeed slows down soon, caution is necessary. Companies might see declining revenues, which could impact profitability and stock prices.

For perspective, S&P 500 companies generate about 40% of their sales outside the U.S. Thus, if the global economy is affected, $0.40 of every $1.00 of sales at S&P 500 firms could face repercussions.

### Summary

Prepare for potential headlines such as, “Global economic slowdown strengthens,” which might be followed by falling stock markets. Be vigilant if this occurs. Though there will be significant declines, lucrative buying opportunities could emerge amidst the turmoil.