This How The ‘Everything Bubble’ Will End

This How The ‘Everything Bubble’ Will End

The comments below are an edited and abridged synopsis of an article by Nick Giambruno

There’s a good chance of a stock market crash of historic proportions before the end of President Trump’s first term, because the Federal Reserve’s current rate-hiking cycle, which started in 2015, is set to pop the ‘everything’ bubble.

Bubbles are inflated when easy money from low interest rates floods into a certain asset. Rate hikes do the opposite. They suck money out of the economy and pop the bubbles created from low rates.

Almost every Fed rate-hiking cycle ends in a crisis. Specifically, 16 of the last 19 times the Fed started a series of interest rate hikes, some sort of crisis that tanked the stock market followed. That’s around 84% of the time.

Giambruno walks us through a few of the major crises (1929, 1987, the Asia crisis and the LTCM collapse, the tech bubble, the subprime meltdown and the 2008 financial crisis).

Another crisis is imminent, thanks to unprecedented amounts of easy money resulting from QE 1, 2 and 3. The trillions of dollars the Fed printed created not just ahousing or tech bubble, but an ‘everything’ bubble. The warning signs arethere: emerging markets are flashing red; there’s an unsustainable economicexpansion; and we’re in the longest bull market ever.

Prepare for the pop. The US economy and stock market are overdue for a recession andcorrection by any historical standard, regardless of what the Fed does.