Someone asked me, “what are the possible stimuli that can cause the next crisis”? Admittedly, I cannot think of something realistic that can cause a major catastrophe. Korea war is unlikely to happen.
On the other hand, let me now ask, “what are the upcoming good news that may stimulate the market”? There are not many also. In my opinion, there are more likely to be bad news that good news ahead.
Upcoming good news:
- US tax reform
- China one belt one road
Upcoming potential bad news:
- North Korea
- Global trade war
- Inflation and rates surge
Potentially, the US stock market may climax when Trump pulls through the US tax reform. This may be a classic “buy on rumour, sell on fact”. After the tax reform, there will be no more stimulus for investors to discount. Besides China, I cannot see any other stimulus coming from any other country. The US will continue to tighten, and the EU already said they may start their tightening.
Tax reform also means for more capital spending, and that means less share buybacks. (There were US$3.5T share buybacks in the last 8 years)
With the US Fed rebalancing, I can only see monetary tightening in 2018 and 2019. The US market may indeed climax when Trump pulls through his tax reforms.
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