- Fears of market collapse are being fuelled by whipsawing markets, economic turmoil, red flags at banks, and whipsawing price swings.
- Experts say that the Fed’s rate increases are a major driver of recent volatility and a darkening outlook.
- Here’s what six experts said about the current market risks, and the threats to banks.
Volatility, economic woes and signs of distress at large banks are fueling fears about markets collapsing and roiling global financial systems.
Market strategists point out the Federal Reserve as the key driver of the current chaos. In an attempt to reduce historic inflation, the US central bank raised interest rates from nearly zero in March to a range between 3% and 3.25%.
However, rates have increased and stocks are falling. Bond yields have risen. The US Dollar to Surge. Experts believe that there is a greater risk of a global economic slowdown.
Credit Suisse’s stock plummeted this week and insurance against defaults by the Swiss bank on its debts rose. Those moves suggest Investors are increasingly worriedAbout the stability of the lender as it prepares for restructure.
Here are 6 experts’ opinions on the market risks today.
1. Charlie McElligott at Nomura is a cross-asset macro strategist
“The velocity of things breaking around the world … is obviously a ‘neon swan’ telling us that we are clearly now in the market accident stage,” McElligott The Financial Times. He was describing the current dangers as blatant, compared with a “black swan” — a rare, unpredictable, and impactful event.
The strong dollar is “causing tremendous strains economically … and increasingly, metastasizing in markets,” McElligott added.
2. Michael Edwards, deputy investment chief at Weiss Multi-Strategy Avisers
Edwards said to the FT, “When financial conditions get tighter, everyone is trying to find who or what will make central banks blink.”
He stated that the Fed must tighten its funding conditions in order to cool the US economy’s buoyancy. This means “someone will be hurt.”
3. George Goncalves, Head of US Macro Strategy at MUFG
Goncalves explained to the FT that the story is about boiling lobsters.
He continued, “That’s what’s happening in markets. The Fed is turning up heat.” “But the market is still full of liquidity, so it’s difficult to see where the weakness is.”
4. Ark Invest’s chief executive Cathie wood
Wood stated that there are “stresses and strains in our financial system” that have already begun to manifest themselves. CNBCTuesday. “We are currently experiencing a major financial crisis.”
Wood referred to the pain that Britain’s pensions sector felt. UK government bond yields have surgedLast week’s high cost of insurance against the default of America’s largest banks.
5. Sheila Bair was the former chairperson of the Federal Deposit Insurance Corporation.
“It is concerning when a bank, in market conditions like these, says they’re restructuring. They’re going sell assets. They’re going raise capital,” she stated about Credit Suisse in a Interview with Fox BusinessThursday “I believe this requires very careful observation.”
Bair stressed the dangers of derivatives and emphasized the interconnectedness in the banking system. He also noted that there is always a big loser when things go wrong.
“The complexity surrounding these products, fancy financial engineering, who’s left to hold the bag?” She asked. “It was AIG the last time. Let’s hope it isn’t Credit Suisse this time.”
She also called on the Fed not to raise rates, as this could result in a credit crunch which would impact American businesses and consumers.
6. Bruce Kasman is the head of economic research for JPMorgan Chase
Kasman explained to the FT that the financial system is not particularly vulnerable right now, since banks remain healthy and most corporations don’t require financing.
He did however note that the US Treasury’s Financial Stress Index has risen to nearly a 2-year high. This suggests that higher rates and a weaker dollar are spreading financial market stress.
Kasman said that the risks to global financial stability were becoming more well-known.
