Lehman Brothers collapsed in September 2008, Sparking the global financial crisis as all major financial markets was plunged into meltdown. Its been 10 years and the world economy is still on ventilator, although economy is almost unpredictable but there are some signs in recent days which indicates the world is close to the Second Great Depression according to the experts.
1. GOLD PRICE:The Price of Gold is always and most sure indication of the health of world economy. The price of gold has risen by almost 17% over the course of five years in terms of Euro. This is surely not a positive picture and indicates that continuous stock market loses lie ahead. Gold is known as a safe heaven of investors and historical stats also confirms that precious metals perform well when other assets do badly specifically the stock market.
2. DOW JONES: The Dow Jones Industrial Average is crucial to the global market because it is price weighted index, means stocks weights as per the share prices in the index. The Dow Jones has continued to plunge in value and in fact October 2018 was one of the most volatile month in last hundred of years. Goldman Sachs chief US equity strategist David Kostin said to CNBC: “Put simply, stocks have already started to price in the risk of an economic slowdown.”
However there may be a short term trend reversal, if any progress happens in trade talks between the US and China at the G-20 summit in December. The results of this meeting between Trump and Xi will be key and could have an impact but in long term Dow Jones is set to see a consistent inclination.
3. CRYPTOCURRENCIES: CryptoCurrencies are considered as an alternate digital asset and gained a great popularity in recent years. Bitcoin was traded @ $14,000 in January but since then, digital assets have lost close to $700 billion of their market value. Bitcoin is pluming toward the $3,000-mark, first time in more than a year the cryptocurrency has dropped below $5,000. But many economist are positive on this asset and there are speculations about that the market of “Future of money” will reach 5000% above its present valuation in the next 10 years. The rise of crypto is death of banking system.
4. US INTEREST RATES: Increasing interest rates is a strong signs of what Federal Reserve is anticipating about the future of economy. The Federal Reserve is anticipated for another hike in December, on top of the three other increases already done in 2018. Even US President Donald Trump has criticized the Fed and branded them as “crazy” in a scathing rant. The Fed snapped back at Mr Trump, claiming the US economy is strong enough that efforts to encourage borrowing and boost economic activity is no longer necessary.
So when long-term rates are lower than short-term ones, what’s known as an ‘inverted yield curve’, it’s telling us that markets think the Federal Reserve is going to have to stop raising rates and start cutting them in the near future. And when would it do that? When it’s trying to fight a recession.
5. TECH STOCKS:The backbone of financial markets, some of the world’s biggest tech giants have tumbled. Apple, Facebook, Amazon and Netflix all major tech stocks are down from 4 to 22 percent from October. Apart from the reasons the impact of this never before plunge in heavy weight techshares value is substantial on global market and if it continues it will greatly impact the world economy.
6. INFLATION:Global inflation levels are steadily increasing over the years, with the biggest rise in recent times being sparked by the 2008 financial crash. The annual percentage change in global inflation in 2018 is 3.8 percent as per IMF. Higher then expected inflation rates is problematic for the global economy. The Fed target was 2 per cent and inflation is rising beyond the target and is set to continue throughout 2019. Europe and Asia are nor different, Inflation and PMI data have disappointed in Europe, informing our negative outlook for the bloc. Experts expect downward pressure on the euro, and are negative on European high yield and periphery government debt, for as long as political uncertainty and slow growth define the region.
Even the best investment strategist asking their investors to become ready for the years of struggle in the near future as the series of recent event whether it is ongoing trade war of powerful nations or arrest of Huawei CFO Meng Wanzhou in Canada. The markets will remain volatile and in longer term will cause another global financial depression. The global economy will be impacted badly with an possible exception of Russia.