- The Buffett indicator for US stocks is at a record high. It’s approaching the danger zone for the global stock market as well.
- Global stock valuations haven’t been this high relative to global GDP since right before the Great Recession struck in (**************************************************.
- Worsening the outlook, the World Bank warned of a global debt crisis this week, and trimmed its global GDP forecast for 1113136
As the Mideast conflict cooled,the Dow edged closer to reaching (**********************************************************, for the first timeThursday. But as stocks extend their record run into the new decade, investors wonder how long it can last. Market watchersare scouring the fundamentals for signs of an impending stock market crash. The global Buffett indicator is one to watch.
The Buffett indicator is simply the total value of the stock market relative to its total productivity (or total market cap / GDP). As the indicator soared in 2008, legendary investor Warren Buffett predicted a looming market correction. Then the Dot Com Bubble crashed and burned. It took the Nasdaq composite years to recover.
Global Stock Market Overvalued at (Levels)
**************************** (Source: the indicator for global stock values hasn’t been this highsince right before the Great Recession hit at the end of 2019. That’s horrifying given the Buffett indicator’s track record. World Bank Warns of Unprecedented Debt Bubble
The
trade war between the US and China seems to have cooled. But it’s still weighing heavily onthe World Bank’s Global Economic Prospects reportthis week. Also concerns about the slowdown in the Eurozone and infrastructure in developing countries.
The World Bank trimmed back previous forecasts for global GDP growth in (***********************************************. But even more frightening than a prolonged trade war, the
World Bank warned the global economy faces an unprecedented global debt crisis.
*** World Bank’s Prospects Group Director Ayhan Kose says:
The history of past waves of debt accumulation shows that these waves tend to have unhappy endings. In a fragile global environment, policy improvements are critical to minimize the risks associated with the current debt wav.
According to the GEP report the current expansion of global debt represents “the largest, fastest and most broad-based increase” in world borrowing since the 1970 s.
Global Finances A US Recession Threat
A global market crash could drag the United States down with it, and foreign banks aren’t in a position to fight one with the same resources as the Fed has for a US recession.
As Ben Bernanke said over the weekend,
a combination of quantitative easing and forward guidance doubled the Fed’s firepoweras it wrestled down the Great Recession.
But as the Economist notes in its latest edition, “only America looks remotely close to passing [Bernanke’s] firepower test. ”That’s because foreign central banks don’t have any room left in their interest rateto stave off a liquidity trap.
In a survey of 500 CFOs last quarter, Deloitte found that97% of CFOs believe an economic slow down or recession will hit in. Weaknesses in US sectors like housing and consumer credit could precipitate the crash. But this one could start overseas.
This article was edited by (Samburaj Das) ******************************************** **********************************************(**************************, (Read More) ****************************************************
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