Dear Reader,
The Standard and Poor's 500 US stock market index is up approximately 25% since its recent trough.
With this new bull market, are global stock markets about to stage a large rally, recover and even surpass again their most recent all time highs?
No. I am of the opinion that we are in for a huge stock market fall, again. US, European and Asian stock indices could fall more that 40% from current levels. Why? Because the global economy has simply stopped due to the coronavirus pandemic. This is bound to affect profoundly the welfare of companies the world over. Yes, I know global central banks lead by the US Federal Reserve have flushed the global economy with trillions of USD through various programs. This new liquidity has found its way apparently into stock markets.
But, hey, if we could solve every economic problem by printing money, why have not we done this always?
The creditworthiness of companies all over the world is bound to diminish to dangerous levels, which could point to insolvency. The tourism, travel and leisure sectors have basically become virtually insolvent.
Stock markets cannot continue to defy gravity for a long time. John Maynard Keynes has famously said: "Markets can stay irrational longer than you can remain solvent". I agree 100%. Helped by money printing global stock markets are at irrationally high levels for the current environment of total economic demand and supply destruction. Sooner or later, something is about to give and valuations will reset at much lower levels.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
The Standard and Poor's 500 US stock market index is up approximately 25% since its recent trough.
With this new bull market, are global stock markets about to stage a large rally, recover and even surpass again their most recent all time highs?
No. I am of the opinion that we are in for a huge stock market fall, again. US, European and Asian stock indices could fall more that 40% from current levels. Why? Because the global economy has simply stopped due to the coronavirus pandemic. This is bound to affect profoundly the welfare of companies the world over. Yes, I know global central banks lead by the US Federal Reserve have flushed the global economy with trillions of USD through various programs. This new liquidity has found its way apparently into stock markets.
But, hey, if we could solve every economic problem by printing money, why have not we done this always?
The creditworthiness of companies all over the world is bound to diminish to dangerous levels, which could point to insolvency. The tourism, travel and leisure sectors have basically become virtually insolvent.
Stock markets cannot continue to defy gravity for a long time. John Maynard Keynes has famously said: "Markets can stay irrational longer than you can remain solvent". I agree 100%. Helped by money printing global stock markets are at irrationally high levels for the current environment of total economic demand and supply destruction. Sooner or later, something is about to give and valuations will reset at much lower levels.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
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.)!
Respectfully yours,
Petar Posledovich
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