Exporters Should Continue to Exercise Strong Due Diligence

Markets continued to rally yesterday providing some hope to exporters around the world and in Canada. However, economic troubles persist and will do so for some time. Exporters should continue to operate with strong due diligence on companies, industry verticals and countries they operate in. All three will continue to be impacted for months and possibly years to come.

Jeremy Grantham, a leading investment strategist and with a reputation for timing markets and predicting large scale corrections, believes the markets (typically, a predictor of the economy) are grossly mis-matched to what is happening in the real economy. He said, the supply and demand shock to the economy is ‘unlike anything before.’ He may again be right.

Yesterday, the WTO forecasted that the merchandise trade will drop 32% this year, sparking a frenzied price war between shipping companies. This will help exporters a little with lower logistical costs.

In addition, the WTO stated that the emerging economies will contract for the first time in six decades (globally the economy will contract 5.2%). Areas hit hardest will be Latin America and the Caribbean which is forecast to drop 7.2%.

There was one bright spot yesterday, with oil demand increasing. While large stockpiles built up in the past 6 weeks will need to be depleted, it does mean that economies are starting to come back to life. Some economists and market analysts are still calling for a sharp V correction in the economy, but there will need to be rapid improvement in economic activity for that to play out. We wait……

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