Chorus Of Financial Experts Warn Of Imminent Crisis
A growing list of financial gurus and industry experts are warning that 2016 could see a devastating collapse in global financial markets, pushing America into an economic downturn potentially worse than the 2008 recession.
Analysts at Citigroup, famed financial broker Peter Schiff, hedge fund giants Ray Dalio and George Soros and a list of others are warning about dangerous economic events on the horizon, if not outright predicting a collapse in the stock market.
The threat stems from the idea that the bull market of the past six years has been driven by monetary expansion and cheap credit, and as a result, central banks globally are running out of tricks to spur growth, reports Financial Times.
Analysts highlight market reaction to the first interest rate hike by the Federal Reserve in a decade in December, which is being viewed retroactively by many as a mistake. Markets have suffered early this year and may deter further planned rate increases by U.S. policymakers. (RELATED: How The Fed Boxed Itself In On Interest Rates)
“The market views tightening as a mistake now,” Jordi Visser, chief investment officer at Weiss Multi-Strategy Advisers told Financial Times. “I don’t think 25 basis points matters much but the market clearly does. We’re now closer to a recession than we all realize.”
Earlier this week, Citigroup updated its market clock chart warning the country is entering Phase 4 of the economic cycle. In Phase 4, credit and equity dry up as a response to tightening monetary policy, which means the threat of a potential recession becomes much higher, reports Business Insider.
Ray Dalio, founder of the largest hedge fund in the world has recently come out against the Federal Reserve and its plans to hike interest rates further in 2016. In the wake of the oil glut and Chinese volatility, Dalio argues in an op-ed for Financial Times that tightening monetary policy will be counter-productive and that the U.S. is nearing the end of a long-term debt cycle that could test the reliance of global markets.
George Soros, hedge fund expert known for his enormous contributions to progressive causes and influence backing Democrats in U.S. elections, has issued similar warnings, however his actions speak louder than words. The noted investor recently admitted he is betting against continued market growth, shorting Asian currencies and the Dow Jones Industrial Average, reports CNN Money. (RELATED: Is China Going To War With George Soros?)
“When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008,” Soros said in a January speech in Sri Lanka.
The boldest prediction for 2016 so far comes from Peter Schiff, a noted bear who successfully predicted the bursting of the housing bubble and subsequent financial collapse. Schiff, CEO and chief global strategist for Euro Pacific Capital, says there is an impending debt bubble that will drag the economy into a pit.
When the bubble bursts, Schiff argues the Fed will be forced to follow Japan’s recent policy of negative interest rates, in a last ditch effort to stimulate growth, reports Business Insider.
“I think the Fed is going to have negative interest rates before the election because we’re going to be in a serious recession,” Schiff told Business Insider. “We’re headed for a real economic collapse the order of magnitude of which will be much greater than 2008’s crash.”
The situation globally has been deteriorating with oil prices at historic lows, fluctuating around $30 a barrel, while China’s volatile economy has thrown global markets into chaos. Corporate debt has piled up to $29 trillion and one third of global companies are operating in a funding deficit, reports Bloomberg. (RELATED: The $29 Trillion Debt Bomb That Has Investors Rattled)
Meanwhile, the domestic labor market has shown signs of slowing down, while economic growth in December grew only 0.7 percent and exports dropped sharply.
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