03

May 2019

03

May 2019

No place to hide from the biggest bubble burst yet!

By StoneX Bullion

The current economic growth experienced around the globe is expected to come to an end, as all economic upswings do. No one should ignore the risk that this bubble will burst, as is evident from the past.  Some economists are predicting a recession by the end of 2020. In the event of the “bursting of the bubble”, investors should position themselves by having a proven hedge during bearing times.  

Global debt could easily reach the 500 trillion USD mark in a few years. Corporate debt will trigger the next recession and this will start a liquidity crisis and create numerous unrelated problems in various markets. Some companies will be forced to pull back on hiring or lay off workers and reduce investments in their businesses. They’ll also have to cut back sharply on share buybacks, which has been one of the factors that has driven the bull market for stocks.

Markets and most businesses will figure out how to survive but the average household will feel the impact the greatest. Inflation is also increasing and rising oil prices are contributing additional inflationary pressures. As dynamic and future orientated investors start anticipating a growth stagnation in 2020, markets will reprice risky assets in 2019.

Recessions do not come along like the seasons of the year and therefor time is not a great indicator of the next recession, we have seen gaps between recessions of anything between one and ten years on average. It is of concern that we going above the 10-year average and I think many investors are preparing themselves for the inevitable.

The world’s central banks are counting on the power of gold to help them through economic times, while there’s still time to protect the profits you have made over the course of the nearly decade-old bull market. In the event of a downturn, there will be minimal growth prospects. Disciplined decision making will be essential. You will need to lead with the right proportions of cost-conscious frugality and bold innovation.

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