More and more talks are opening up about a global recession which will start from the US stock market. Investors have for the most part, enjoyed the last 10 years. After the global financial crisis of 2008, things started going upwards. Sure, there was lots of helicopter money involved, but the economy seemed to be on the rise.
This decade-long bull market however, might be coming to a very nasty end. Investors will most definitely be forced to rethink their options.
Vanguard Chief Investment Officer Greg Davis gave a strong warning when he shared his thoughts.
According to Davis, despite being in bear market territory, the stock market had a decent run so far this year. He stated:
“If we try to look forward to the next 10 years, our expectations around the US equity markets is roughly a 5% median annualized return. This is very low. 5 or so years ago, we would have probably been somewhere between 7% and 8%. This unfortunately means we have to adjust our expectations to reality when it comes to the US equity market.”
Nowadays, a global recession will have serious consequences
Davis also shared that a global recession is a frightening occurrence but Vanguard is trying to remain optimistic. He believes that earnings growth will probably be in the mid-single digits. This year, US corporate earnings are projected to drop by 0.8% per share for Q1 2019.
The chief economist for Gluskin Sheff, David Rosenberg stated that the losses from 2018’s end may just be the beginning. Rosenberg himself isn’t very optimistic as he stated:
“We’re going into a recession. I believe it will happen this year.”
A global recession is always a frightening concept, but with how far cryptocurrencies have come, maybe they can be the save haven investors are looking for.
Most economists however, believe that when the global recession arrives, cryptocurrencies will take a major hit just like fiat. The majority of investors still believe that precious metals are THE safe haven in such events.
Davis also shared that the odds of a global recession have increased from 30% to 35%. Additionally, the odds for a recession in election year have jumped up to more than 50%. Vanguard has taken a more defensive approach on active credit.
With the Federal Reserve coming near the end of its rate-rising cycle, no one can say for certain how things will play out.
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