A Stock Market Crash In 2018 Taki Tsaklanos 2 years ago Tags:2018 Forecasts, DJIA, SPX
A stock market crash in 2018? Yes, very likely, because several market indicators flashing red. This is why.
[Ed. note: at the bottom of this article we added a section on the October 2018 stock market crash and what it may imply going forward.]
The U.S. stock market is in an amazing shape. Every day new all-time highs are set. This MUST be bullish, and investors should go all-in, right? Well, not that fast, at least not in our opinion. We see many signs that this rally is getting overextended, from an historical perspective. While we clearly said a year ago that we were bullish for this year, we did not see any stock market crash coming (a year ago). Right now, we are now on record with a forecast of a stock market crash in 2018, and it could take place as early as the first weeks / months of 2018.
So far, in all openness and transparency, our warning signals for a mini-crash in the stock market in November were invalidated. We were horribly wrong in terms of timing. However, we still believe that there is a huge risk brewing for a mini-crash. The stronger the current rally, the stronger the fallback.
Yes, we do expect a strong mini-crash in the stock market in 2018, starting early 2018. Central banks will likely step in to avoid a similar chaos as in 2008/2009, so we don’t forecast the end of the financial system.
"All of 2018, there's been this nonstop search for the thing that would bring this cycle to an end," said Nick Colas, co-founder of the market insight firm Datatrek Research in an interview with Vox. "For a while, the market was able to shrug it off, but the last couple of months have made people feel as if this is the end."
Former Fed Chairman Alan Greenspan said to CNN on Dec. 18 that he did not believe the stock market would rally in 2019 either.
"The bull market is beginning to fumble. ... It would be very surprising to see it stabilize here, then take off again," Greenspan said. A bull market is marked by investor confidence and high buying.
The stock market is sensitive to fears that can spiral, according to Colas of Datatrek Research. Once the tumult gets going, variability can increase because of investors behavior.
"Once you get spooked by something, you start being very sensitive to other bumps in the night," Colas said.
To calculate the real gross domestic product, or GDP, per capita, which reflects the total output of the country, the gross domestic product should be divided by the population of the country. GDP can be calculated for any size of population, but it is often used for populations of countries.
The GDP is a direct indicator of the economy of a country and of the living standards of that country. It is indicative of the amount of money that people in the country make and the amount of items that the country is exporting. When the economy is in a recession, the GDP of that country will be lower as a result of people working less, needing fewer accommodations and producing fewer goods to be sent out to other areas. When the economy is good, people will spend more money on products, will often purchase more luxury products and industries will produce more products. The production of more products is a direct result of the demand that is set by the people of the country and can be a result of a higher number of citizens employed by the production company. When other countries are suffering from a recession, the GDP of countries that export to those countries can be affected as a result of a lower demand of goods.
The World Bank released its Global Economic Prospects report this week.
For VOA Learning English, this is the Economics Report in Special English.
The World Bank released its Global Economic Prospects report this week. World Bank experts are using the words “fragile” and “uncertain” to describe the economic recovery this year.
The report predicts the international economy will grow a little over two percent in 2013. Slightly greater economic expansion is expected in 2014 and 2015.
Predictions of limited growth have become familiar since the financial crisis four years ago. Wealthy countries are expected to have slower growth than developing ones as they deal with larger amounts of debt and big budget deficits.
World Bank President Jim Yong Kim is urging developing countries to become drivers of growth. But he notes that it was important to build a foundation for growth that can last over time.