5 ‘CRASH’ Catalysts Likely To Cause a Global Market Slump

We all know what happens during a global market slump, and it certainly doesn’t leave a lot of people happy because of the devaluation of assets that it causes. However, investors need to keep a close eye on several factors and react instantly in the case of a market decline. Bank of America has recently outlined 5 factors likely to cause a drop in asset prices and given it the acronym CRASH.

CRASH is a clever and catchy acronym helping to remind and indicate to investors the negative direction that market could be taking. Each factor of the acronym is an assumption based consensus in the market, which, if overthrown, could initiate a market slump. Let’s find out what these factors are:

Consumers

In the recent months, US consumption data has been unexpectedly weak. If the US GDP growth stumbles again in Q2 and Q3, few of the consumers are readily positioned to sell off in US bonds, stocks, and dollars.

Rates

Investors are expecting low and stable interest rates, but if inflation rises quicker than it is expected, then investors could be witness to rise in interest rates and instability

A-shares

Stocks in China are surging which should be a cause of concern for investors. That is because they aren’t positioned for a policy failure in China which could be full blown when it happens. The A-share market is no signal to a decline in Chinese activity, in spite of weak growth expectations in China.

Speculation

Investors in some systematic macro funds have levered positions that do not take into account a rise in cash rates, which adds to the risk and suggests that they have crowded these funds.

High Yield

The biggest problem for positioning remains in markets that are scrambling to find investments giving decent yields, when around the world the interest rates are low.

A change in any one of these factors could easily trigger a global market slump, so along with other things, investors need to eye the ‘CRASH’ closely as well if they want to remain on the side of the market bearing minimum losses when it does crash. These factors won’t necessarily disturb the asset market, but can most likely contribute to a market slump. Having been named by the Bank of America clearly now, it seems in the favor of investors to keep an eye out.