Murray Gunn, Head of Research for Elliott Wave International’s Global Market Perspective offers his opinion on the future of the Western economies:
“We think the major Western economies are on the cusp of turning down into the worst recession we have seen in our history. Sitting near its highest ratio ever, U.S. total credit market debt to GDP assumes a perpetual economic growth engine that quite simply does not exist. Should the U.S. economy start to shrink, and our analysis suggests that it will, the high nominal levels of debt will instantly become a very big issue. People will look to central banks to help them out, based upon the incorrect assumption that the Fed controls interest rates. They do not. The Fed merely follows the rates that the free market has already set. Case in point – everyone waited with bated breath Wednesday afternoon to see what the Fed would do. And the Fed raised rates ¼%. Big deal. The free market has been raising short-term interest rates for the better part of two years now from near zero to over 2%. People are actually shopping yields. The Fed is just following the free market, happily taking and receiving credit for work that they do not perform. In fact, the Fed is probably quite happy to be raising rates now in order to give it some scope for cutting rates in the coming downturn. As the economy weakens, the authorities will be found wanting because they won’t have the monetary policy firepower, and confidence in the Fed will be lost. Our prediction is that central banks will go from being feted for ‘saving the world’ in 2008 – which they didn’t anyway – to being vilified for being impotent in the coming deflationary crash.”
[REITs]
About Murray Gunn
Murray Gunn is Head of Research for Elliott Wave International’s Global Market Perspective, a monthly summary of the firm’s 25 analysts’ views on every major freely-traded market in the world. After earning his Master of Arts (Honors) degree in Economics from the University of Dundee in Scotland in 1991, Gunn went into fund management.
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Seven Possible Causes Of Next Market Crash
US household net worth recently topped $100 trillion for the first time in history, but actual US household income has only recently climbed back to levels seen in 2007, before the financial crisis – a possible signal of the next market crash, new research suggests. Financial security investigator and bestselling author Pamela Yellen notes:
When (and why) will the next market crash occur?
We are now in the longest running bull market in history at 9½ years – and no bull market has ever made it to its 10th birthday.
“While there’s no guarantee this bull market will crash before it hits its 10th birthday in early 2019, we do know that, historically, the longest-running bull markets go out ‘with a bang, not a whimper,’” Pamela says.
Possible causes of the next collapse include:
- Interest Rates Jump – “Risk-taking and leveraging have exploded. Interest rate increases that are faster than expected could push down stocks and commodities and trigger a domino effect.”
- Certifiably Crazy World Leaders with Their Finger on the Trigger – “The threats posed by countries like North Korea and Iran are very real… and very unpredictable.”
- Cyber Attacks and Disruptions to the Power Grid – Attacks by countries like China, North Korea, Russia, and Iran are becoming more common and more debilitating.
- Emerging Markets in Distress or Chaos – “Countries from Turkey to Argentina and South Africa are experiencing market and currency plunges, along with interest rate and recession woes which could spread to other countries.”
- China Could Crack – China has so far weathered the threats of a trade war and a rising But a real-estate crash or defaults of local government-owned financing vehicles could be the breaking point and would impact our economy.
- Trump Might Be Impeached – Although he would likely stay in office, confidence in the bull market that really took off when Trump got elected could be undermined.
- Very Tight Labor Market – An incredibly tight labor market has resulted in 911 emergency call centers not being able to get enough people to answer the phones. And prisons are now training inmates to be coders. What could possibly go wrong with that?
“The bottom line is that the current bull market isn’t going to last forever. If you don’t have a ‘Plan B’ for the next market crash and a significant portion of your savings portfolio in safe and liquid financial vehicles, you are in for some serious pain that could last for many years.” Pamela advocates The Bank On Yourself wealth-building strategy that’s never had a losing year in more than 160 years.
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