Are we at the beginning of a 2008-like stock market crash?

Or will the FED resort to QE4 and zero(or negative) interest rates just in time?

Pls move to the correct forum if it’s wrong forum for the topic.

Thanks.

The answer is certianly Yes. Unless it’s No.

We’ve probably all heard the joke, economists have predicted twelve of the past five recessions. There are bad signs from some quarters of the global economy, particularly China and Europe. Will it be enough to cause a recession? Probably not. Unless it is.

I guess CPI data is crucial. Jan CPI will be declared on 19th Feb. I am thinking without a QE, it would not be possible to sustain these valuations -
http://www.valueexplorer.com/fileadmin/user_upload/Shiller_PE_Ratio.png

If the CPI is too negative, stock market will drop quite fast and QE4 will have to be announced soon (That means raising debt to GDP ratio even more)

Probably the fair value for dow Jones is between 11k-12k.

Do you understand any of the economic data you’re quoting? CPI is one way to measure inflation. No one expects there to be substantial inflation, especially with the sharp drop in energy prices. Quantitative easing is a program where the Federal Reserve injects money in to the economy as a stimulus. Gross Domestic Product might be a more useful statistic to look at, that number is a much better indicator of economic growth. However, the initial GDP number is subject to two revisions and it can be revised drastically.

Thanks. I had no clue.

Though too negative inflation could suggest how the real economy is reacting to no more QEs and to rising interest rate scenario. Continuous month-on-month Negative inflation is bad for corporate earnings and for market sentiment. It is useful to track CPI anyways but slightly more so since GDP will be released once in 3 months(?), but CPI every month.

Recession is when you have 2 continuous quarters of degrowth in GDP I.e. you will see wait for 6 months to confirm it. But if have early signs, you can get out of equity markets early enough to prevent losses. Without a QE, I don’t think current levels can be sustained.

While the stock market and the general economy are correlated over time, the market is far more fickle and sometimes completely irrational. For the past few months, it’s mostly tracked the price of oil which makes no sense.

A wiser post has not been made.

Can’t argue with it.

I’ll say, my professional clients - the larger firms and such - are taking the recent volatility in stride. It’s the individual clients who are getting very jumpy and calling quite a bit.

CPI may very well be negative, due to the drop in energy prices. You might want to focus on core CPI - it’s less volatile.

Yes, the signs been there awhile now.

Thanks everyone for valuable contributions. Pls keep sharing your views.

Anyone here been listening to Mike Malloney or Peter Schiff about how historically, the currency works, changes every 30-40 years?

It used to be backed by gold 40 years back which was removed, so the FED could print potentially infinite amounts. Will the currency have to again be backed by gold anytime soon if the possibility of repeated QEs coupled with negligible economic recovery and stock market bubbles becomes a reality?

How would returning to the gold standard help economic recovery? It would do the opposite . A huge misconception is that QE is akin to “printing money” and then dropping it from the sky. It is not that. It is an expansion of the Fed’s balance sheet through strategic purchase of assets from the private sector (like mortgage bonds). We’ve had three rounds of QE; you tell me how bad inflation has been the last few years.

World is interconnected and Inflation is quite bad in many other countries and there is a currency crisis, and some on the verge of default. This can be attributed to 7 years of QE.

QEs have largely resulted in increasing the public (Govt.) Debt in USA. Private debt to GDP ratio is fine at this point I guess.

I am not saying QE is bad for USA although repeated QE will increase Govt. debt to an extent that it will be impossible to repay and the balance sheet will start looking unreal. Also, QEs cause bubbles in stock markets.

A 2008 stock market crash could happen, although I don’t think it will, but if it’s in the offing, the Fed can’t stop it. I just don’t see what the catalyst would be for a 2008-style crash. Are banks heavily leveraged in an asset that is sharply dropping in value, like oil?

Bad inflation in some countries is mainly their own fault and had nothing to do with QE in the US. What’s the currency crisis? Which countries?

Definitely many banks are overexposed in the oil field. But it won’t likely be of the magnitude of the mortgage crisis.

My money is invested on the assumption that we’ll have some minor ups and down, but return to steady growth before too many years.

I can’t seem to find the article I read last month, but they were analyzing this issue from the perspective of how many things have to be bad at once. The biggest crashes all involved virtually all of the factors they looked at. When factors are mixed, there may be smaller corrections or no crash at all. Right now, the factors aren’t even all that mixed, in their analysis - other than mostly stagnant wages, the indicators are all in the “This is OK, just not as good as we’d like” category. That predicts possibly slow growth, but not a collapse.

If you’re listening to people advocating a gold standard, then you’re listening to people who don’t know what they’re talking about. That sounds to me like a physician saying “If we give the patient enough cyanide, I can assure you that they won’t die of cancer.”

We’ve already had a stock market crash. The FTSE 100 was over 7,000; it was 5,500 recently. A drop of over 20%

In December of 2007, there was an op-ed piece in the NY Times by an academic economist who claimed to have an infalliable method to predict recessions and that we were definitely not headed for a recession in 2008. Arguably, she was right; arguably what happened was a full-blown depression and we are still in it.

From long term charts, the rally started from 3500. People these days use Fibonacci retracement according to which it should retrace 62% of the rally. So the next level to come could be 4900.

I am in India. we are down from 9000 to 6900. Barring the US, every other market has already dropped significantly.