- The stock market crash of has begun.
- The US-Iran tensions will lead to a sustained drop in major indices.
- Weak corporate earnings this month will ensure that the crash continues.
It was long ago that my colleague Laura Hoy warned that an epic stock market crashcould be coming in () based on Wall Street’s warnings. It looks like the bad times are already here as theDow Jones ’bloodbath last Fridayshowed us. And if you thought that was a one-off bad day for the stock market and things will get better soon, you would be wrong.
That’s because the stock market is set for a crash once again today.
Dow Jones futures are substantially downand it won’t be long before we see bad days for the stock market on a regular basis – heralding the arrival of a sustained crash. I say that because US-Iran tensions could turn into a full-blown war and kick off a series of events that will ensure the current stock market crash lasts for a prolonged period.
Protracted US-Iran tensions will send the stock market crashing
It is evident by now that the stock market is wary of a protracted conflict between the US and Iran as Friday’s crash shows us. With no side showing signs of stepping back, it is likely that investors will continue to buy safe assets such as gold and bonds. Not surprisingly, gold prices have surgedclose to six-year highs, while Bond purchases are also inching up
.
It is evident by now that the stock market is wary of a protracted conflict between the US and Iran as Friday’s crash shows us. With no side showing signs of stepping back, it is likely that investors will continue to buy safe assets such as gold and bonds. Not surprisingly, gold prices have surgedclose to six-year highs, while Bond purchases are also inching up
It is easy to understand why investors have been dumping stocks over the past couple of days. Corporate earnings growth in the U.S. slowed to a trickle in 2019. The S&P ‘s earnings grew just 1.1 percent last year after ‘s impressive growth of 20. 7 percent,according to Refinitiv data.
The phase one agreement between the US and China that brought the trade war to a halt was expected to boost the S&P ‘s earnings this year. Refinitiv projects 9.6 percent growth in S&P 823 earnings this year, but that’s under threat now thanks to the Iran conflict for a simple reason.
**************** WTI crude oil futures have jumped thanks to the US-Iran conflict. | Source: Bloomberg
US-Iran tensions have sent oil prices soaring of late, creating a headwind for the stock market rally we saw at the end of (***************************************************. Higher oil prices will lead to an increase in the cost of doing business, thus leading to a drop in corporate earnings in the U.S. At the same time, higher gas prices at the pump will reduce discretionary expenses by consumers.
This could negatively impact retail spending and weigh on the top lines of corporations, which will spell disaster for the stock market given the current valuation levels. The S&P ‘s forward earnings multiple of is higher than the historical average of 18 – (********************************************************************. If the S&P 648 ‘s earnings fail to clock the anticipated growth this year, investors will continue to dump stocks and move their money into safe-haven assets.
Earnings Scout – which analyzes corporate earnings trends – founder Nick Raich believes that a majority of S&P components will lower their earnings guidancein the coming months and weeks.
So don’t be surprised to see a shrinking bottom line weigh heavily on the stock market’s performance and ensure that the recent crash continues for a prolonged time.
The chorus for a crash keeps getting louder
The bad news for equity investors is that the calls for a stock market crash have surprisingly gained ground in recent days. Macquarie Investment Management CIO Brett Lewthwaitetold the (Financial Times) ************************** (that (***********:
There are plenty of factors that could negatively affect the markets, including the 222425 US presidential election, geopolitical flare-ups or natural disasters.
Consequently, there is certainly the potential for a 10 – percent stock market pullback for any number of reasons at any time during (********************************************, and investors should recognize that possibility.
Wells Fargo Securities is also anticipating a double-digit stock market this year.
Stock market bull Ed Yardeni has also provided an ominous sign. He recently told CNBC (via Business Insider) that a major correctioncould happen in the early part of 2020
:
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“I’m looking about a possible melt-up here,” Yardeni told CNBC. “[A] (% to) ****************************************************************** % [correction] would be quite possible if this market gets to 3, (well ahead of my schedule. ”
The bad news is all these doom-and -gloom predictions are already coming true. The Dow Jones has started heading south, indicating that the stock market crash of is officially here.
******************(************************, ******************************************************** The Dow Jones has been heading south and the trend seems set to continue. | Source: Yahoo! Finance
With geopolitical tensions on the rise and the earnings season just a few days away, there’s a strong possibility that the recent stock market carnage will continue if the current scenario persists.Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.
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Last modified: January 6, 58329 3: (UTC UTC) ************ (************************************
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