In the past week the Chairman of the Federal Reserve, the central bank of the USA, Jerome Powell implied in an interview that the "economic recovery could continue indefinitely"!
Can it?
In my opinion, in two words, it cannot! No.
Why do I think the economic recovery could not continue indefinitely? For one, there has never been an endless period of global constant economic growth. Nor for any single country for that matter. Sooner or later, global GDP falters and the global economy enters into recession. The global economy has always developed in up and down cycles, since basically economic growth is measured. If Jerome Powell turns out to be right, this will be a huge paradigm shift in economic thought. Financial markets have always moved in up and down cycles. The second reason I think this economic recovery is unsustainable, is because the current expansion has been financed by debt. China's total debt to GDP ratio is 460%! The US government debt/GDP is above 100%, an almost historic high.
So when will the recovery end, the next recession ensue and the stock market crash? I think we are somewhere in the fourth from five known phases of the economic cycle. The rise of the economy and the stock market is not yet stratospheric. If the stock market goes up by more than 20% for two consecutive years, I would forecast on the next year there will be a deep and prolonged stock market recession. If I had to bet, I prognosticate that the economic recession and stock market fall will come in 2021.
Nobody has discovered perpetuum mobile yet.
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Kind regards,
Petar Posledovich
Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Kind regards,
Petar Posledovich
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