3 Triggers That Could Push This Sell-Off Into A Crisis
SummaryThere’s very real possibility of a global recession in the next six months.
The three most likely triggers are corporate debt, a trade war, and a slowdown in Europe.
I highly suggest building a cash reserve, deleverage as much as possible, and have a plan for your long-term investments.
There's very real possibility the global economy breaks down in the next six months. Anything could trigger a crisis, and it could well be something no one now foresees. But here are my three candidates.
Corporate Credit CrisisUS companies are way more leveraged now than they were ahead of the 2008 crisis. We saw then what happens when the commercial paper market seizes up. And, that was without a Fed in tightening mode.
There are trillions of dollars of low-rated corporate debt that can easily slide into the junk debt category in a recession.
Trade WarOne reason the US economy seems to be booming right now is a surge in imports. Companies are rushing to build inventory ahead of the 25% tariff on Chinese goods that takes effect January 1.
European SlowdownWe recently got October PMI reports from Markit. Its eurozone manufacturing and services index dropped to the lowest point since September 2016. Export-dependent Germany looked especially weak.
Meanwhile, Italy's new budget is wildly out of line with its revenue and growth prospects. This threatens to set off another euro crisis. And then, there's the serious possibility of a hard Brexit in early 2019.
In short, Europe is in real danger of entering recession next year. If that happens, the impact will spread around the globe as the continent reduces imports from the US, China, and elsewhere. Not to mention the potential fireworks if Italy or anyone else actually defaults on debt payments to foreign lenders.
So, What Do You Do?https://seekingalpha.com/article/4219876-3-triggers-push-sell-crisis?ifp=0====================================
Well "Normally", events unfold in a reasonably predictable sequence.
So, timing can be estimated, within reasonable parameters.
BUT, this time around, THE UNFOLDING EVENTS, are PRETTY MUCH ONCE IN HISTORY (UNIQUE) AND THOSE WITH VESTED INTERESTS ARE ALSO PULLING/PUSHING FOR OUTCOMES TO CHANGE! So, picking the timing this time, is much more difficult!
The Major Economic Movers involved are -
1) Demographics (Population Growth is slowing. It has been for quite some time Globally & it will go Negative!)
2) Energy (It has been Cheap & Available, for most of the Modern Era, But that is changing & Change will happen irrespective of Who Tries What!)
3) Climate (the fairytale Climate, which has been with us for quite some time, is now changing & Ending!)
So in terms of Final Outcomes, Good Luck!
I think, WE may All need it!