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We're just few days into 2017. If we look back, 2016, like 2015, or every year before that, was a watershed year full of surprises. It started with the China scare, followed by Brexit, Trump's victory, easy money policies, and last but not the least, demonetisation. There was doom and gloom everywhere...and it still continues. Indeed, the year 2016 once again reminded us of the most essential features of the global economy: uncertainty and volatility.
Reports suggest that the year 2016 saw a huge escalation in uncertainty ever. The global economic policy uncertainty (EPU) index rose by a massive 149% in the 11 months to November 2016. This was recorded as the steepest rise ever and reflected the surprising events that took place in 2016.
The EPU index tracks the general state of the economy as it relates to businesses. It can include broad economy-wide conditions or the specific economic conditions of a particular industry.
The sharp rise in the global EPU index was seen as the global economy saw many unpredictable events in 2016. Most of the brunt came from Brexit, Trump's victory, and the continuation of easy money policies by central banks around the world.
An interesting bit here was that the index for India stood benign compared to the global one. This meant that economic policy in India stood more stable than the global economy.
But this doesn't mean that India is sailing safe amid the volatile times. The demonetisation move has fueled enough uncertainty in the Indian economy. In fact, the EPU index for India surged in November and December 2016 after the government scrapped old Rs 500 and Rs 1,000 notes. Further, it is also said that the index will see an upward trend until mid-2017. So, be prepared for some unexpected bumps ahead.
Meanwhile, we'll continue to tell you how to stay ahead of fellow investors. Many investors think that the only way to avoid volatility is to invest pretty much the way everyone else does. And often this means owning the most popular companies - usually the ones whose prospects look most promising overt the next few quarters. But make no mistake. If history is any indication, the recipe to let Mr Market serve you remains the same: Invest in fundamentally strong companies run by good management teams and trading at attractive valuations.
If stock markets take a beating driven by uncertainty, it would be the best time to prepare yourself for what you probably missed out on during the 2009 and 2013 crashes. So don't let the uncertainty spook you. Instead, allow you the patience and perseverance to ride the market volatility. We believe we have found 5 warning signals or red flags that show up in a business right before its stock price plummets. Get the details in The 'Crash Score' Report.
For information on how to pick stocks that have the potential to deliver big returns, download our special report now!