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Third of US stock market may be wiped out as consumer spending ‘maxed out’ | |
(about 2 hours later) | |
American stocks could see a significant decline in the coming months due to a number of trends that point to a downturn in the global economy, according to Saxo Bank Chief Economist Steen Jakobsen. | American stocks could see a significant decline in the coming months due to a number of trends that point to a downturn in the global economy, according to Saxo Bank Chief Economist Steen Jakobsen. |
Citing several factors including growing credit loans and a widening fiscal deficit in the US, he expressed doubts over infrastructure spending plans and a potential global trade war. | Citing several factors including growing credit loans and a widening fiscal deficit in the US, he expressed doubts over infrastructure spending plans and a potential global trade war. |
“All the data we've seen over the last few weeks has basically been that the consumer is maxed out, we've seen that in credit card loans as well, so I think the consumer is done spending the money,” said Jakobsen. | “All the data we've seen over the last few weeks has basically been that the consumer is maxed out, we've seen that in credit card loans as well, so I think the consumer is done spending the money,” said Jakobsen. |
Statistics showed that US consumer confidence declined in March, falling below expectations and breaking a two-month streak of gains. | Statistics showed that US consumer confidence declined in March, falling below expectations and breaking a two-month streak of gains. |
“I think overall we have been pricing in for Goldilocks and we are closer to Frankenstein to be honest,” he said, adding that in a scenario of a potential sudden economic recession, there could be a market correction of between 25 and 30 percent. | “I think overall we have been pricing in for Goldilocks and we are closer to Frankenstein to be honest,” he said, adding that in a scenario of a potential sudden economic recession, there could be a market correction of between 25 and 30 percent. |
The economist highlighted a “Goldilocks” scenario, saying that he feels traders are mistakenly pricing in to markets, where fresh economic data are either not too hot or not too cold. | The economist highlighted a “Goldilocks” scenario, saying that he feels traders are mistakenly pricing in to markets, where fresh economic data are either not too hot or not too cold. |
According to Jakobsen, the so-called drivers of strong global growth, such as higher inflation and higher investment, “aren't actually materializing.” He made a reference to the novel “Frankenstein,” arguing that the economy had been skewed by central bankers, who have injected trillions of dollars into the global economy to boost growth and investment. | According to Jakobsen, the so-called drivers of strong global growth, such as higher inflation and higher investment, “aren't actually materializing.” He made a reference to the novel “Frankenstein,” arguing that the economy had been skewed by central bankers, who have injected trillions of dollars into the global economy to boost growth and investment. |
The first quarter of 2018 “started at more than 5 percent expected GDP; we are now significantly less than 2 percent for the (first quarter) expected, so I don't really see things happening in the growth area,” he said. | The first quarter of 2018 “started at more than 5 percent expected GDP; we are now significantly less than 2 percent for the (first quarter) expected, so I don't really see things happening in the growth area,” he said. |
Jakobsen explained: “We've been at 2 percent exactly since the financial crisis; I don't think we're going to deviate from that.” | Jakobsen explained: “We've been at 2 percent exactly since the financial crisis; I don't think we're going to deviate from that.” |
The Organization for Economic Cooperation and Development (OECD) estimated a 3.9 percent growth rate this month for the 20 most-developed economies in 2018 and 2019. It warned, however, that trade tensions could threaten their best economic outlook in seven years. | The Organization for Economic Cooperation and Development (OECD) estimated a 3.9 percent growth rate this month for the 20 most-developed economies in 2018 and 2019. It warned, however, that trade tensions could threaten their best economic outlook in seven years. |
Jakobsen said fears over a potential global trade war have become a “catalyst” for lower economic prospects, but added that there are other factors clouding economic growth. | Jakobsen said fears over a potential global trade war have become a “catalyst” for lower economic prospects, but added that there are other factors clouding economic growth. |
“We have slow growth, no inflation input coming through, the infrastructure spending is not in the spending bill in the US anymore, so a lot of the factors strategists go on this program to talk about again and again aren't actually materializing.” | “We have slow growth, no inflation input coming through, the infrastructure spending is not in the spending bill in the US anymore, so a lot of the factors strategists go on this program to talk about again and again aren't actually materializing.” |
For more stories on economy & finance visit RT's business section | For more stories on economy & finance visit RT's business section |
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