The stock market carries enormous wealth. The historical\naverage return on the stock market was around 7%, including reinvestment of\nprofits. This means that they have left behind other investment instruments,\nsuch as bonds, commodities and banking particles.<\/p>\n\n\n\n
The stock market is always subject to inevitable\ncorrections. Since 1950, for example, the S&P has undergone 37 corrections,\nof at least 10%. Usually, we have only one significant decline in the stock\nmarket every 1.9 years on average. It seems to have become a matter of time\nbefore a new stock market crash. The following events may be a major cause of\nthis:<\/p>\n\n\n\n
Trump’s Tweets<\/strong>: Arguably the biggest risk to the\nstock market is President Trump’s access to the social networking platform\nTwitter. The US president uses Twitter to share his thoughts several times each\nday, and these ideas are not always well received by the market. As an example,\nTrump criticized the central bank, which he believes is raising interest rates\ntoo quickly, and that the economy would be buoyant if the central bank tended\nto aggressively cut lending rates. Trump’s pace of work appears to hurt the\ncountry’s central bank’s credibility. It\u2019s enough to say that Trump’s tweets\nmove the markets, and this step is not necessarily in the upside.<\/p>\n\n\n\n US-China Trade War<\/strong>: Chinese President Xi Jinping does\nnot want to abandon the competitive advantages that make Chinese goods so\nprofitable for US companies, and allow his country to reap net trade surpluses\nwith the United States every year. This has led to little progress in securing\na long-term trade agreement between the two countries. If the United States and\nChina escalate the trade war by imposing higher tariffs on products imported by\nthem, it could slow both countries’ GDP growth and affect the global economy.<\/p>\n\n\n\n No deal Brexit<\/strong>: Former UK Prime Minister Theresa May\nworked for years to work out a Brexit plan. Her resignation, announced in May\n2019, came after she failed three times to pass a plan in the Parliament that\nwould lead to a 21-month transition period outside the EU. Thus, a \u201cno deal\nBrexit\u201d is a nicer way of saying that the UK will leave the EU immediately,\neven without trade deals. That could mean higher tariffs and costs for imports\nand exports across the board, and much weaker growth prospects for the UK and\npossibly Europe, which would not make Wall Street happy.<\/p>\n\n\n\n Failure of the US Federal Reserve<\/strong>: The Federal\nReserve is always closely monitored by the stock market. But this is especially\nin focus given the Fed’s recent shift from monetary tightening to monetary\neasing. The central bank ended up passing nine interest rate increases of 25\nbasis points to the federal funds rate within three years. In late July, the Federal\nReserve cut the federal funds rate for the first time in more than a decade.\nWall Street is looking for the Fed to remain open to the idea of \u200b\u200bmore\nmonetary easing. If the Fed fails to do so, the stock market will almost\ncertainly be negatively affected.<\/p>\n\n\n\n The 2020 election<\/strong>: The 2020 elections can play a key\nrole in the next stock market crash. Trump being most probably a candidate has\nled to a major reform of corporate taxes and at least a temporary increase in\nprofits. In other words, we were looking at another four years of a\npro-business president lobbying for a weak dollar and lower interest rates.\nThings get a little cloudy when it comes to about 20 candidates competing for\nthe Democratic ticket. Leading candidate Joe Biden has called for a cut in\nTrump’s tax reform, but he has a more moderate political record than many of\nhis peers.<\/p>\n\n\n\n Debt crisis in Europe<\/strong>: For nearly a decade, debt has\nremained a major problem in the EU. All member states, including Spain,\nPortugal and Ireland, have requested bailouts, with Greece needing to be bailed\nout of bankruptcy. Rising debt levels have limited growth prospects across\nthese countries and limits growth potential in much of the EU. Italy, for\nexample, has a high debt-to-GDP ratio of 132%. Last October, the European\nCommission rejected Italy’s call to reduce the budget deficit for three years\nby 2.4%. Bringing Italy on the same page as the EU seems an impossible task,\nand this can cause problems for the region, and thus for the whole world.<\/p>\n\n\n\n Oil Awakening<\/strong>: Investors should not rule out the\npossibility that the oil market will send shock waves to Wall Street. More\nrecently in 2015, the US oil and gas industry was supporting 10.3 million jobs\nand adding $ 1.3 trillion to the country’s annual economy. But if WTI prices\nfall below $50, or if natural gas prices fall, it is likely that we will see\njob cuts and slower growth in US GDP as a direct result of energy sector\nproblems. Another issue is that the impact on oil markets has become tougher.\nThe Organization of Petroleum Exporting Countries (OPEC) plans to reduce its\nproduction until sometime in 2020, the idea being that the reduction in\nproduction will raise oil prices and remove any surplus in the global supply.\n\n\n\nHowever, the United States now produces more oil\nthan OPEC member Saudi Arabia and Russia as well. The Organization of the\nPetroleum Exporting Countries (OPEC) usually cuts supply only to some extent\nwhen the United States increases oil and gas production.\n\n\n\n<\/p>\n","protected":false},"excerpt":{"rendered":" The stock market carries enormous wealth. The historical average return on the stock market was around 7%, including reinvestment of profits. 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