interest-rising

Stock Market Crash January 2017 update: Interest Rates Rising will cause Crash

In December the S&P went up by 1.8%, the Dow Jones added an amazing 3.4% and the Nasdaq gained 1.1%. It seems that the Dow Jones hitting the 20,000 points target is just a matter of time. US stock indices went up around 10% since Trump was elected as US president on November 8th. That is not a very healthy movement in a period of nearly 2 months. So short term the market is really overbought but we expect the Dow Jones to still hit the 20,000 target before going down. What will get it down? Read further…

Interest rates are rising. One of the reasons is that investors believe Trump will cause inflation. Not a single country has less debt than in 2008, so problems will be worse this time. Italy for example has a national debt of 133%. Studies have showed that under normal circumstances countries are already having trouble to grow with debt level of 60-70%. Because of all the QE programs interest rates stayed low, so the debt is still manageable so far. Despite the continuing QE program of the ECB, interest rates are going up. You already see mortgage rates and fixed income rates going up in Europe. Since the FED raised interest rates and stopped QE the rates in the US are going up. Investors in Europe, Asia and other parts of the world will definitely check possibilities to invest in US bonds with higher interest rates. This causes interest rates to rise worldwide together with the US interest rate since money from other countries is flowing into US bonds and away from not-US bonds. This means the US interest rate is leading, also since it is the most important rate because of its world reserve currency. When the first domino will fall, for example Deutsche Bank or Italy, the rest will follow.

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