2018 has been the stock market most volatile year since the 2009 market crash and now in 2019 cracks have started to appear in the markets and fundamentals are not looking as strong as they once were, which indicates that the crash is more likely to happen ten years later.
According to many economists, analysts, investors, and traders, several warnings signs are showing red flags in the market causing them to predict crash this year. So, what are their predictions?
Rising US Interest Rates
As the US economy is currently booming, the US Federal Reserve has increased interest rates in eight different times since 2015, and there is an increased threat of rising inflation as the US nears full employment.
Increasing interest rates is one strategy to control the rise of inflation, thereby increasing the cost of credit, striking balance between people spending and making saving more attractive.
Unfortunately, there are also dangers to this strategy. History has revealed that it can lead to economic shrinkage, stock market crashes, and falling stock prices.
The End of the Economic Boom
2018 was the stock market most volatile year since the recession, and higher volatility can increase the likelihood of stock market crises. Rising interest rates and increased volatilities are leading economists and investors warning of an imminent stock market crash in 2019.
Investment Officer of Guggenheim Partners, Scott Minerd has forecast a 40 percent retracement, while Ted Bauman an economist believes the market could fall by 70 percent.
Missing US data expectations
Both sentiment indicators and economic data are missing analyst expectations for the first time in Donald Trump’s administration.
US factory activity has missed every estimate in Bloomberg surveys and has dropped to a two year low. According to Jeff Carbone off Cornerstone Wealth, “the market is pricing in a recession no matter what.