With the United States’ stock market sagging, crude oil off to its worst start in history, and the Chinese economy steadily deteriorating, there are plenty of reasons for the bears to be growling on Wall Street, in Paris, and in London too. Let me put it further into perspective for you; the Dow Jones had its worst four-day start to a year on record!
The situation is so dire in fact, that a strategist at Société Générale is convinced that the world is on a collision course for disaster. And, if this analyst is correct, it will bring the value of equities down with the collapse. According to his estimates, the U.S. stock market could plunge as much as 75%. The outlook for alternative investments in 2016 is far better.
The illusion of of prosperity is shattered as boom now turns to bust. – Albert Edwards, Strategist at Société Générale
The challenge for the global economy is that for years it has been dependent upon the American Federal Reserve’s massive bond buying program to prop up equity prices, and stimulate growth in the world’s emerging markets, which by the way have a surprising amount of purchasing power and fuel approximately 80% of the world’s economic growth. That said, now that the U.S. Federal Government has stopped purchasing bonds and has made the move to raise rates, the artificial growth in asset prices that has been experienced since the last financial crisis can expected to come undone.
Market analysts, who are becoming increasingly bearish it seems, have suggested that the developments in China’s stock market in 2015 are evidence that something is terribly wrong; and that investors should expect another recession. this will of course be followed by aggressive central bank action to fight the collapsing equity prices and negative economic growth. Bottom line, China’s stock market woes could have a significant impact on the global economy. Even the White House officials are monitoring market movements closely and constantly assessing their potential impact on the U.S. economy.
Don’t feel too bad, as you’re definitely not alone. Just about every single major stock market around the world has started the year like that. So at least we’re all poor together. – Jason Abbruzzese, Author of “China’s Stock Market Crash Matters To All Of Us“
Typically a global recession is triggered when an economy builds up excess capacity that becomes unwound. Presently, both the global oil and the commodities markets appear to fit this description, and thus investors should prepare for the worst when the inflated markets come undone.
There’s a mad rush for the exits! – Peter Kenny, Independent Market Strategist and Founder of Kenny’s Commentary
The fact of the matter is that Chinese stock markets have become a victim of Beijing’s failed efforts to stabilize financial markets. As such, the trading turbulence in China’s markets has eroded investor confidence in America, and around the world.