I went out for a coffee and started reading various news articles

 A selection of  what I read

  1. Reports in a newspaper of potential major store closure in local shopping mall
  2. Patisserie Valerie reported to be experiencing financial problems and reports of alleged accounting manipulation https://www.bbc.co.uk/news/business-45824285
  3. A number of major Equity Indices showing sharp falls this week
  4. The IMF Global Financial Stability Report, October 2018 just published: https://www.imf.org/en/Publications/GFSR/Issues/2018/09/25/Global-Financial-Stability-Report-October-2018

A comment in the summary states “ The October 2018 Global Financial Stability Report (GFSR) finds that global near-term risks to financial stability have increased somewhat, reflecting mounting pressures in emerging market economies and escalating trade tensions. These risks, while still moderate, could increase significantly……”

5. In a report on Global House Prices for the Q2 2018 period     https://content.knightfrank.com/research/84/documents/en/global-house-price-index-q2-2018-5804.pdf a comment was

“Yet despite this improving scenario, at 4.7% the index has recorded its slowest rate of annual growth since Q3 2016. Our analysis confirms that whilst fewer countries and territories are seeing a decline in house prices, where prices are rising, they are rising at a more moderate pace…..”

What’s the message?

The saying goes “it never rains but it pours”. As the above events show there are increasing signs of a weakening business environment at a time of many instances of political instability and Trade Wars and rising US$ interest rates. Hopefully the examples of weakening economic conditions don’t turn into a flood of problems and a significant economic downturn. There are however plenty of reasons to be apprehensive and take shelter now from any financial storms.

In the case of the corporate credit markets below is a link to  a file on “Red Flags” which will help you assess potential warning signs in the corporate sector. If events follow experience in past business cycles we can expect both heightened credit risk and, at a later date, distressed credit opportunities.

Red flags,10.18