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ECON Stock Market Facing a 2019 Crash: 70% Correction Warning
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  1. #1

    Stock Market Facing a 2019 Crash: 70% Correction Warning

    Stock Market Facing a 2019 Crash: 70% Correction Warning
    Increased volatility and rising interest rates are leading investors and economists to warn of an impending stock market crash.

    Crisis ahead
    July 2019 will mark exactly 10 years since the end of the Global Financial Crisis in 2009. It will also mark the longest period of economic expansion on record, surpassing the 1991 to 2001 internet boom.

    The question – Is the current boom sustainable?

    The 90s economic boom was fuelled by the internet. This economic recovery has been fuelled by historically low-interest rates and cheap credit – a situation many investors and economists say cannot last.

    Warning Signs: The End of the Economic Boom
    2018 has been the most volatile year in the stock market since the recession, and volatility can make stock market crises more likely.

    Source: CNBC
    Yet, volatility is just one reason the world’s biggest hedge fund managers and leading economists are predicting a 2019 crash. Another reason is rising interest rates.

    The Interest Rates and Financial Crises Relationship
    As the US economy firing on all cylinders, the Federal Reserve has increased interest rates eight times since 2015. However, as the US nears full employment, there is an increased danger of rising inflation and consumer prices.

    Increasing interest rates is a strategy to curb the rise of inflation – increasing the cost of credit and making saving more attractive strikes a balance between people spending and saving.

    However, there are also dangers to this approach. Lower consumer spending has a negative impact on the revenue of consumer-facing businesses. Declining revenue then tightens spending across both the consumer and business landscapes. At the same time, higher interest rates make it harder for financially weak companies to meet their debt obligations.

    In a vicious cycle that can lead to economic shrinkage, falling stock prices, and stock market crashes, it’s not surprising that interest rate hikes have preceded over 10 economic recessions in the past 40 years.

    Source: Forbes
    Expert Predictions: A 70% Stock Market Crash
    Increased volatility and rising interest rates are leading investors and economists to warn of an impending stock market crash.

    According to hedge fund manager Paul Tudor Jones, “We have the strongest economy in 40 years, at full employment. The mood is euphoric. But it is unsustainable and comes with costs such as bubbles in stocks and credit.”

    Scott Minerd, Chairman of Investments and Global Chief Investment Officer of Guggenheim Partners has forecast a 40% retracement, while economist Ted Bauman believes the market could fall by 70%.

    Finally, the CIA’s Financial Threat and Asymmetric Warfare Advisor Jim Rickards has claimed that a 70% drop is the best case scenario.

    How Traders Can Take Advantage
    With great volatility can come great rewards, and the right financial instruments give traders the opportunity to profit in both rising and falling markets.

    By using share CFDs and index CFDs, traders can turn any potential market crash into a profit, or hedge their existing investments until the market turns, with short trades. However, keep in mind that volatile markets can result in higher trading risks, so proper risk management and volatility protection is essential.

  2. #2
    'Just Around the Bend': This Is When the Stock Market Will Crash, According to 5 Famous Investors

    By RYAN DEROUSSEAU April 24, 2018
    Just when you thought it was safe to be in the market again, the Dow Jones industrial average sank more than 420 points, or just under 2%, on Tuesday.

    By one measure, Wall Street hasn’t been this scary since the depths of the global financial panic in 2009. So is this the end of the bull market?

    Most market watchers say no. In fact, only 18% of money managers surveyed by Bank of America Merrill Lynch believe that stocks have peaked.

    Yet the market is historically frothy after a near-record nine-year bull run. And if history teaches us anything, it’s that the key to success in investing is a willingness to go against the grain.

    That’s what these five well-known strategists are known for. And their warnings about impending market doom shouldn’t go unheeded.

    The Bear: David Stockman

    url=https%3A%2F%2Fmoneydotcomvip.files.wordpress.c om%2F2018%2F04%2F180411-stock-prediction-stockman.jpg&w=800&c=sc&poi=face&q=85[/IMG]

    David Stockman, former director of the Office of Management and Budget under President Reagan, speaks during a Bloomberg Television interview in New York, U.S., on Wednesday, Nov. 4, 2015. Stockman discussed the latest U.S. budget deal. Chris Goodney/Bloomberg— Getty Images
    Who he is: Former budget director for the Reagan White House; former investment banker with Salomon Brothers; former private equity investor.

    When to expect the worst: Imminent. “There is surely a doozy just around the bend.”

    His reasoning: Stockman expects “an epic monetary and fiscal (policy) collision,” he told CNBC. On the one hand, the recent tax cuts enacted by Congress are likely to help push the federal budget deficit to nearly $1 trillion next year. At the exact same time, the Federal Reserve is starting to unwind its sizable bond portfolio — which it amassed in the aftermath of the financial crisis to keep bond yields low to juice economy activity.

    The result of the Treasury Department and Fed both selling mountains of U.S. bonds in the open market? A monumental jump in market interest rates that will likely spook the historically frothy stock market.

    Yet investors seem to be in denial, he said, adding that “the market is whistling past the graveyard.”

    The Bear: Scott Minerd

    url=https%3A%2F%2Fmoneydotcomvip.files.wordpress.c om%2F2018%2F04%2F180411-stock-prediction-minerd.jpg&w=800&c=sc&poi=face&q=85[/IMG]

    Scott Minerd, Chairman of Investments and Global Chief Investment Officer of Guggenheim Partners, speaks during the Milken Institute Global Conference in Beverly Hills, California, May 1, 2017. Lucy Nicholson—Reuters
    Who he is: Global chief investment officer and chairman of investments for Guggenheim Partners

    When to expect the worst: 2019. “The markets are potentially on a collision course for disaster.”

    His reasoning: Strong fiscal stimulus at the end of this business cycle, at a time when the economy is already at so-called full employment, is likely to force the Federal Reserve to step in and be more aggressive with interest rate hikes to try to keep inflation in check, Minerd fears.

    As market rates spike, it will be that much harder for financially weak companies to meet their obligations, especially after the initial impact from the Trump tax cuts subside.

    Short-term rates only need to reach 3% to increase corporate defaults, according to Minerd, who expects the Fed to raise rates four times in 2018 and “probably four times next year.” That implies short-term rates will hit 2.5% to 2.75% a year from now and will be 3.25% to 3.5% a year after that.

    Over the next year, “equities will probably continue to go up as we have all these stock buybacks and free cash flow,” Minerd told CNBC. But “ultimately, when the chickens come home to roost and we have a recession, we’re going to see a lot of pressure on equities especially as defaults rise, and I think once we reach a peak that we’ll probably see a 40% retracement in equities.”

    Minerd likens today’s market to 1987, when stocks suffered a major collapse in October. That year, the market got off to a fast start before investors began to fear the Fed was too slow to address inflationary pressures. “Today, investors have the same sorts of concerns they had in 1987,” he told clients earlier this year.

    The Bear: Paul Tudor Jones

    Paul Tudor Jones speaks at the National Audubon Society Gala on March 1, 2017 at Gotham Hall in New York City. Patrick McMullan—Patrick McMullan via Getty Image
    Who he is: Famed hedge fund manager and founder of The Tudor Group. He is credited for having called the October 1987 market crash.

    When to expect the worst: As soon as next year. “We are replaying an age-old storyline of financial bubbles that has been played many times before.”

    His reasoning: “We have the strongest economy in 40 years, at full employment. The mood is euphoric. But it is unsustainable and comes with costs such as bubbles in stocks and credit,” Jones said in an interview with Goldman Sachs.

    The notoriously media shy hedge fund billionaire believes a recession is coming in the next year or so, because the Fed took too long to raise rates to keep the economy from overheating.

    Inflation will follow faster than expected, Jones told his shareholders in a February letter, forcing the Fed to increase rates quicker than stated. “This market’s current temperament feels so much like either Japan in 1989 or the U.S. in 1999,” he told clients, according to Bloomberg.

    For the record, Japanese stocks slipped into an epic bear market at the beginning of 1990 and the tech bubble burst in the U.S. in March 2000.

    “The events that have transpired so far this January make me feel more convinced than ever of this repeating history,” Tudor said.

    The Bear: Ray Dalio

    American businessman and founder of the investment firm Bridgewater Associates, Ray Dalio, visits LinkedIn for an interview with Executive Editor at LinkedIn, Daniel Roth at LinkedIn Studios on April 8, 2016 in New York City. Astrid Stawiarz—Getty Images for LinkedIn
    Who he is: Famed investor and founder of Bridgewater Associates, the world’s largest hedge fund.

    When to expect the worst: By 2020. “I think we are in a pre-bubble stage that could go into a bubble stage.”

    His reasoning: The chance of the U.S. economy suffering a recession before the next presidential election is around 70%, Dalio said at a recent appearance at the Harvard Kennedy School’s Institute of Politics.

    The influx of cash into the market, both due to Trump’s tax cuts, and future initiatives – like an infrastructure bill – combined with a strong economy will force the Federal Reserve to raise rates to combat inflation. That’s never an easy task for the Fed. “The risks of a recession in the next 18-24 months are rising,” wrote Dalio.

    Keep in mind, though, that the stock market has historically anticipated recessions by six to 12 months, so the real selling could begin well before that.

    The Bear: John Hussman

    Investor John Hussman is photographed for Fortune Magazine on November 29, 2011 in Baltimore, Maryland. Mike McGregor—Contour by Getty Images
    Who he is: President, Hussman Investment Trust and well-known contrarian investor

    When to expect the worst: It’s anyone’s guess. But when the bear does emerge from hibernation, expect “a market loss on the order of 60%.”

    His reasoning: Hussman has warned about a market crash for a couple years now, as stock valuations reach highs not seen since 2000, right before the dotcom bubble popped. He argues that speculation has driven investors to propel this over-priced market higher.

    Blind optimism over the tax cuts have led Wall Street analysts to produce a 2019 forward earnings estimate that’s 46% greater than the most recent 12-month operating earnings for the S&P 500, he said. “The combination of extreme valuations and extreme earnings expectations creates a situation that’s ripe for disappointment,” wrote Hussman in a recent blog post on his company site.

    Hussman adds that the volatility seen in the market is due to more investors becoming risk averse, fearing a significant drop.

  3. #3
    Join Date
    May 2005
    North Georgia Mountains
    Both of these articles are from 2018 and a lot has changed economically and politically since then. I know you like to doom and gloom but you could have found more recent articles to prove your point. Hell zerohedge has one every day or so. Personally I'd like to see a major drop in the stock market but since others don't I won't wish it on anyone.

    My predictions are a flat to 10% stock market drop up to the 2020 elections. Then between then and 2023 a farther 20% drop. This still puts the dow at around 17000 which is still overvalued IMO. Expect a bump if Trump wins as the market likes stability but I still think it will drop over the next 2-3 years.

    But the stock market doesn't matter. Its how well the economy holds up in that time frame and does employment stay stable. Hopefully we get more manufacturing jobs being created so some of the folks who current work as bartenders and starbucks employees can get real careers.


  4. #4
    to look at the big drop. we are at the same place with the big drop. that we were at 12 days ago. so we had climbed high enough that a 800 point drop. put us back to where we were 2 weeks ago,


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