System breakdown: bestselling author Marc Friedrich: “A DAX below 5,000 points is also possible” message
indices in this article
• Uncertain outcome of the corona pandemic
• Supply chains break down
• Money remains cheap
The past few days and weeks have not been particularly pleasing for many investors. Nobody still knows how long the pandemic will last and how badly the global economy will suffer in the end. That brings crash prophets like Marc Friedrich on the scene.
No end soon in sight
The federal government has launched a multi-billion stimulus package. The short-time allowance is intended to protect jobs and keep small and medium-sized businesses afloat with rapid emergency aid. But Friedrich does not assume that these measures are sufficient: “I would like to, but I don’t think so. If an antidote to the coronavirus is found within the next two to four weeks or if the virus is miraculously stopped, then this might be possible, but the chances diminish every day. At the same time, the rat tail of collateral damage increases in the billions. ”
The automotive industry in particular has been hit hard by the standstill of the global economy. For almost all car manufacturers, the production lines have been at a standstill for a long time and the international supply chains have also been hit hard. “Even if we would go back to normal operation in two to three weeks, we don’t know which companies are still there, how the supply chains are damaged and how our partner countries are developing,” says Friedrich.
“We are in a recession”
In the United States, unemployment claims are at record highs, and in China, too, observers expect unemployment to rise rapidly. The stock markets have been on the ups and downs for weeks. Analysts are now foregoing predictions, such as on the development of the S&P 500. “We are in a recession and are already in one deflation. If this turns into a global depression with many unemployed, we have not yet seen the end of the flagpole in the stock markets. Then a DAX below 5,000 points is possible – or even lower “, Marc Friedrich looks to the future.
In fact, there are always warning voices that compare the effects of the current crisis with the great depression of 1929. The International Monetary Fund (IMF) estimates that the global economy will shrink by three percent this year and in Germany by seven percent. However, these estimates are still subject to great uncertainty. It all depends on how severe and how long the pandemic will leave its mark and how successful the health and economic policy measures will be.
The central bank experiment failed
Since the 2008 financial crisis, the European Central Bank (ECB) has flooded the markets with cheap money. By the end of the year, the ECB wants to make additional bond purchases of EUR 120 billion and keep the key interest rate at 0.0 percent. It has been at this record low since March 2016. “We did not solve the problems, but simply shifted them into the future with a historic central bank experiment of low interest rates and an unbelievable amount of money, where they have accumulated and increased. [ ] Now we will fail terribly because in 2008 we did not have the courage to pull the plug on the system, “summarizes Marc Friedrich.
Felix Spies / editorship Forex-news.com.net
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