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The Looming Stock Market Crash, Get Ready.

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Introduction

The looming stock market crash rumors have been circulating for a while now. Various industrial leaders are projecting the inevitability of this happening. To understand whether there is a possibility, we need to evaluate the facts.

The reason why investors fear a crash is due to the magnitude of destruction it causes. One of the leaders warning about a possible stock market crash soon is the renowned Robert Kiyosaki. Kiyosaki is the author of the famous book “Rich Dad Poor Dad” which has been a best seller with over 40 million copies.

Kiyosaki is advising people to divest from stock positions and hedge in assets such as Gold, Bitcoin, and Silver.

Financial crisis

A stock market crash is not a new occurrence. Previously, there have been various crashes with the latest being the 2008/2009 financial crisis. However, this one will be the bigger and more devastating.  To understand why this prediction exists, you need to evaluate some important global financial events that could lead to the crash.

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United States Debt crisis

Treasury secretary Janet Yellen has pointed to a potential crisis if the debt ceiling is not raised by October 18. This revelation has sent economists and investors on a roll trying to figure the potential consequences from the announcement

Failure to raise the ceiling means that the US government will have no option other than default on its debt obligations. Such a move is unprecedented and would cause a massive market sell-off and high-interest rates.

Even with the raising of the debt ceiling, the signal is already out that the level of debt is skyrocketing. Huge and unsustainable debts are a sign of trouble on the horizon. US financial health is critical to the well being of global stock markets. Any weakness or uncertainty has the potential to cause calamity.

China Stocks Crackdown

In the last few months, China has been busy cracking down on its own companies’ stocks resulting in huge price falls for the targeted companies’ stocks. As a big global player, China’s decisions have a potential ripple in the global markets.

Such actions by the Chinese government only act as a signal that all is not well in the market.

Most analysts agree the stock of these companies had risen so high so fast making them vulnerable to a potential crash. Regulating these stocks helps them bring sanity to the market through realistic pricing and preventing over-leveraging. Some of the companies affected by the crackdown include Alibaba, Didi, and Tencent.

Such actions magnify the rumors of a possible crash soon.

Covid-19 Pandemic

The Coronavirus is still ravaging the globe. Millions of jobs have been lost while the supply chains disruption remains resulting in decreasing global productivity. However, despite all this happening, house and stock prices continues to rise. Most of them are at the highest ever.

This is a complete mismatch and some analysts are calling these prices unsustainable.

This has made some analysts believe that a correction in the market is inevitable in the long term. The high stock prices don’t indicate the real market situation.

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Cryptocurrencies

Cryptocurrencies are virtual decentralized currencies that run on blockchain technology. They have no central control in comparison to the traditional currencies.

These characteristics have made them alternative investment options to the stock market. They are less likely to be affected by a crash and most investors consider them as safe assets. Launched a decade ago, cryptocurrencies are already averaging $ 2trillion in market valuation. A sign that investors are starting to divest from the stock market.

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