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If you have money invested, or if you want to invest, and you wonder what happened in the last four weeks on stock exchanges around the world, we have two pieces of news for you: one good, one bad.

The good news is that nothing resounding happened. And the bad news? Well, nothing resounding happened.

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March: a month of stagnation

The fact that the markets have been substantially stable, and that even the troubles of the aircraft manufacturing giant Boeing have not created an earthquake, can be seen as a plus. No earthquake equals no losses. However, this lack of movement has analysts and investors very concerned.

Experience shows that markets tend to stand still when they have no confidence in the future and are preparing for a difficult period. A bit like animals, markets "smell the air" and feel the danger coming, even if they still don't know what it will be or where it will come from.

This explains the great calm of these last weeks.

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The three factors that disturb the markets

There are currently three main things that are causing investors to worry. The first is the political instability present in Europe - both with Brexit and the EU elections, troubles in China - due the tariff war currently underway with the US, and the United States - both for the conflict with China, and for the turbulence linked to the Trump presidency (even though, it should be noted, the fact that there has proven to be no link between Donald Trump and RussiaGate has helped the accounts and avoided an earthquake).

The second is the fact that the first reports presented by the Central Banks have all the appearance of being those of economies that are preparing for a phase of recession instead of expansion and growth. European, American and Chinese data are slightly negative, but substantially stagnant.

But even more than the political instability and the flat calm of major economies, the markets are worried about something else: the global monetary base, which is no longer growing.

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The most serious signal: less money in circulation

In 2018 the global monetary base (ie the amount between the currency in circulation and the deposits held by banks) decreased by 2.2%; in 2019, a further decrease of 1.6% is expected.

What does it mean? It means that central banks have stopped issuing new cash to the markets. History teaches that this is both an effect and a cause of a recession.Effect, because it indicates the central banks' lack of confidence in the economic future and therefore their need to "put hay in the barn" with a savings policy. Cause, because in the event of a new crisis (also generated by the general climate of mistrust) the markets would find themselves lacking the liquidity necessary to open and quickly close positions at a loss.

So is there another crisis coming? Perhaps, but nothing is certain.

When it comes to finance and markets, nothing is ever safe or definitive.
And what is true today may no longer be true in a few days, following a sudden event that changes the balance. For this reason, although many elements lead us to fear that soon the world economies could enter into recession and a phase of anxiety could begin again (with the hope that it is not as serious and far reaching as the crash of 2008), in reality it is not at all certain. This is because at least two of the issues that concern the markets, which we have discussed above, could resolve themselves and provide oxygen again to finance.

In particular, the European elections may prove not to be the much-feared earthquake, just as Brexit could experience a lengthy delay, which would trigger a positive situation that would give confidence to the markets.

In the same way, the central banks, fearing an imminent recession, could decide to take a big risk and bet on growth, putting liquidity back in the markets. This would activate a chain reaction of confidence in the markets and the economy.
But for this to happen, political stability is needed, and for there to be political stability, there must be economic growth: it is a vicious circle.

Next month, we'll see how things evolve.

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