Recession in 2014? Why Experts are Predicting a Stock Market Crash in 2014
By Sachin Trivedi | April 11, 2014 1:24 PM EST
Traders work at the Post that trades Ally Financial Inc. following the IPO on the floor of the New York Stock Exchange April 10, 2014. Shares of auto-lender Ally Financial Inc fell as much as 3 percent in their market debut on Thursday, taking the shine off the biggest U.S. IPO so far this year as investor appetite for big stock offerings shows signs of waning.REUTERS/Brendan McDermid
Renowned Investor Marc Faber expected the crash similar to what occurred in 1987. Political instability and wars are bad news for the stock market.
The reported Russian troop buildup at the Ukraine border and the possibility of harsh economic sanctions within the U.S and European countries tend to create a situation of uncertainty. The counter measures that Russia can take include stopping of gas supplies to Ukraine for nonpayment of gas dues. This situation may lead to Ukraine siphoning off gas meant for other European countries.
Another major cause for concern is the possible China slowdown. The country has reportedly seen a drop in both exports and imports in its recently released March trade data. In the past days, technology stocks witness a sharp decline in prices. Analysts feared this may only be the beginning of a trend and a broader fall in stock market is not being ruled out.
One of the reasons analysts expected a stock market crash was many of the stocks are currently overpriced and valuations of stocks are at their peak. Analysts said the only way the stock market can go up from here is when the companies report an increase in revenues and profitability.
Dr. Marc Faber, editor of the Gloom, Boom & Doom Report, compared the current situation to the 1987 market crash. According to him, the U.S printed a lot of dollars in 1970s, which led to high commodity prices until the 1987 crash.
He added the current policy of the federal reserve is similar to the U.S policy in the 1970s. This has led to high inflation across the globe. The situation will eventually lead to a recession and a stock market crash similar to 1987.
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