Predictions that there may be a stock market crash are
increasing in number. The OECD (organization for Economic Cooperation and
Development) recently joined the club to warn that financial asset prices have
increased rapidly and risk a sudden and rapid downturn because they are so
overly valued. While the US GDP is
expected to grow by 2.5% next year, this kind of steady growth is out of synch
with the surging stock market prices and other asset prices. The stock market
is not likely to continue down this road.
In fact, the chief economist at the OECD said the economic
cycle may be near its peak right now for the global economy. A Reuters article
reported that OECD economists are saying that global economic growth may peak
at its eight year high next year. According to a Wall Street Journal article, the
OECD thinks the US and the Eurozone may be at a seven year high for their GDP
growth. Without a significant increase new business investment in all of these
countries, economic growth cannot continue at a strong pace, according to the
OECD chief economist
It’s also concerning that interest rates are so low right
now because that means it would be difficult to
expand monetary policy by further reducing rates to get GDP to
increase—if there is an economic downturn that needs this kind of policy action.
Hopefully, the global economy is not headed into a financial crisis as it did
ten years ago.
https://www.wsj.com/articles/oecd-sees-global-economic-growth-reaching-seven-year-high-1511863206
This article makes some valid points. During the economic outlook conference there were graphs presented that shows how the economy fluctuates up and down over time. Right now we are in our supposed "peak". I think that the economy will begin to slow but hopefully not to the point of the last crisis.
ReplyDeleteIt would seem likely as the stock market has drastically gone up compared to the growth rate of the U.S. economy. This is also a pattern that has continued for some time now so it would not at all be out of the question to see a market correction sometime soon.
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