Stock market guru expects ‘deep recession and credit crunch’

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The great uncertainty among investors seems to be over already: stock markets in the US, Europe and Switzerland have recovered significantly since mid-March. However, this rise may be short-lived. Several experts expect a significant crash in the stock markets in the coming months.

Chris Harvey, an analyst at US financial services provider Wells Fargo, expects a 10 percent correction in the US over the next three to six months. According to Bloomberg, the reason for this is the slowdown in the global economy, the aggressive interest policy of central banks and capital bottlenecks. Due to the US banking crisis, financial institutions there are more cautious about lending.

Hyperinflation would be much more “terrible”

Stock market guru Paul Singer, 78, rates current valuations on exchanges as “still very high”. “There is a significant risk of recession. “In the next round, we see the prospect of lower returns and lower corporate profits, higher unemployment rates, and ample inflation in financial assets and real estate for an extended period of time,” Singer said in an interview with the Wall Street Journal.

Singer is pessimistic about the near future: he predicted in April 2020 that high inflation and rising debt could only be contained by recognizing “a deep recession and credit slump.” This also sends financial markets into a deep slide. The stock market guru had warned of mortgage deals in the US before the 2008 financial crisis.

According to Singer, his prognosis would have been significantly worse than the alternative. “A credit crunch, while terrible, cannot be as terrible for society as hyperinflation.”

turbulence ahead

Singer also believes that tackling inflation will take a long time: When central banks successfully lowered inflation in the 1970s, they thought the problem was over too soon. But then inflation returned in full force.

Uncertainties are high: Just yesterday, the International Monetary Fund (IMF) lowered its growth forecast for the current year to 2.8 percent. According to the IMF report, the global economy has gradually recovered from the effects of the Ukraine war and the epidemic. “However, as the recent instability in the banking sector reminds us, turbulence is building below the surface and the situation is fragile.” (smt)

Source :Blick