World War III – USA vs North Korea
North Korea’s efforts to develop a nuclear-armed ballistic missile capable of hitting the US mainland have accelerated during Donald Trump’s presidency. North Korea has blatantly ignored all the warnings from USA as well as United Nations against further development of nuclear arsenal. USA is also for military action against North Korea. In response to which, North Korea has threatened USA and its allies of dire consequences if there is any intrusion in the North Korean mainland.
Scientists claim that North Korea has actually become a Nuclear super power and it can devastate 3/4th of US mainland with its single nuclear missile. In fact, few experts say that the war has already started and it will only get bloodier from here. If a nuclear war breaks out, there will be a global crisis like we have never seen before.
There have been bubbles in the past involving different commodities like the Tulip Mania, DotCom Bubble, Housing Bubble etc. but a common trend has been witnessed that whenever bubbles like these burst, it eventually leads to a financial crisis. Most experts say BitCoin is also a bubble. In fact, it has become the biggest bubble in the history. Whenever, this bubble will burst it will also bring along a global financial crisis. This is because common man will be the biggest loser when BitCoin starts to fall. The confidence of investors will be shaken and stock market will also tumble as a side effect.
Rising Crude Oil Prices
We all know how essential a commodity is crude oil. Crude oil prices have fallen from the highs of $150/ barrel to as low as $38/ barrel in last 5 years. This has largely benefited the countries like India which import a major portion of their crude oil requirement. Low crude oil price has been one of the reasons why inflation has remained low in India for last few years. But now it seems that crude oil price is all set to rise and enter a bull rally. This is because OPEC nations have started to cut the supply of crude. Crude oil prices have recently touched $65/ barrel and if this rally continues it might not be a good news for India.
Upcoming Lok Sabha Elections and Political Uncertainty
Prime Minister Modi will complete the tenure of 5 years in 2019. The elections are scheduled for May 2019 however, Government has proposed for early Lok Sabha elections along with that of state assembly elections to be held in December 2018. The rationale behind this proposal is to save the massive cost of promotions by political parties during elections. If this proposal is accepted we might see rising political uncertainty in the second half of 2018. The political uncertainty would definitely bring the stock market down.
Ever Rising NPA in Banking Sector
Banking sector is the heart of every economy. Two separate financial stability assessments have suggested that the worst may be far from over for the Indian banking sector. While the RBI’s half-yearly Financial Stability Report (FSR) has pegged the non-performing assets (NPAs) spiking to 10.8 per cent by the March quarter, the International Monetary Fund’s (IMF) Financial System Stability Assessment (FSSA) for India claims that a group of public sector banks are highly vulnerable to further declines in asset quality and higher provisioning needs. Worryingly, it is the private sector banks, popularly perceived to be more prudent, that are reporting the most stress. Private banks registered a whopping 40.8 per cent spike in their gross NPAs compared to 17 per cent by the state-run ones.
Imbalance in Fiscal deficit
The are multiple factors which indicate that a steep hike is going to be there in the governments fiscal deficits. The first major reason being the upcoming elections due to which government will try to make a populist budget for FY 18-19 in order to retain its vote bank. Another major reason is the rising crude oil prices. Since India imports the majority of its crude oil requirement so, steep hike in crude oil price will also cause imbalance in India’s fiscal deficit.
The stock market has been on a bull run for more than a year now. Sensex has now risen to the level of 34000 points after making a bottom near 23000 points in early 2016. Thousands of new investors are entering the market everyday with the hope that market will continue its rally forever. But, many market experts have already warned that a financial crisis might be just around the corner. Lets see what are the reasons that may result in a financial crisis in the near future:
Considering the above economic scenario, every investor shall invest prudently in the stock market from here. The investors may shift to safer investment substitutes like Gold and Debt if the stock markets starts falling.
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Sahil Goel | LinkedIn