Reasons a Stock Market Crash is Looming
Many investment experts have reason to believe a stock market crash is a threat. Some of the smartest brains on wall street believe a fall is right around the corner.
One reason is the increase in stock prices has risen dramatically. Since corporations are using their own cash to buy back their own stocks, this has led to an increase in the stock prices. Companies have spent $500 million on stock buybacks from 2014 into 2016. Since 2010, corporate America has spent $2.1 trillion on stock buybacks, which has affected America tremendously.
Another reason is the increase in stock and real estate prices over the past 7 years. This has been driven largely by the Federal Reserve's printing of money. This is done by keeping rates fairly low and this results in borrowing. If the fed raises the interest rates, the boom will end and the stock prices and real estate prices will collapse. The interest rates increased on December 14th of last year, and many people think this will continue to prevent inflation.
A third reason is that economic activity and job employment is actually declining. Many industries are experiencing major cutbacks, especially retail. JC Penny announced that they are closing 14% of their operations, Macy’s is closing 100 stores, Sears is closing 150 stores and KMart is closing 108 stores. Not only is retail experiencing problems like this, Bank of America, CitiBank and JPMorgan have closed over 100 banks each, leaving many people unemployed.
An additional reason is how similar the stock market is today compared to 1987. In 1987, the dow lost 30% of its cash value. Some investors’ might have unrealistic expectations about President Trump and Congress. Back in 1987, the market was expecting tax cuts that did not occur for more than a year.
According to junior Stefanie Walsh, “ I just learned about the stock market crash in 1929, I guess it’s true that history repeats itself.”
The last reasoning is many investors have quietly cashed out of the market. For example, Warren Buffett sold $900 million worth of this Walmart stock, and completely got rid of his Exxonmobil stock. Buffett is not the only investor to take action like this, he is one of the many. Gold Prices have soared up to $1,250 an ounce starting in February. Bitcoin has soaring prices of $1,204.77 in the same month.
After asking junior at Harborfields, Nichole Ferro if she’s ever heard of Bitcoins, she responded “I’ve never heard of this. It’s really hard to think about paper money not being a thing when we are adults.”