6 experts warn markets are at breaking point – and the financial system may be starting to crack


Financial markets are in turmoil, increasing the risk of system collapse.

  • Soaring prices, economic turmoil and bank warning signals are fueling fears of a market meltdown.
  • Fed rate hikes are a key driver of recent volatility and darkening outlook, experts say.
  • Here’s what six experts said about current market risks and threats to the banking system.
  • For more stories, visit Business Insider.

Volatile assets, economic woes and signs of distress from big banks are fueling fears of collapsing markets and upheaval in the global financial system.

Market strategists point to the Federal Reserve as a key driver of the current chaos. The US central bank raised interest rates from near zero in March to a range of 3% to 3.25% in a bid to cool historic inflation. However, the rate hikes drove stocks down, bond yields up and the US dollar to soar. The risk of a global economic slowdown has in turn increased, experts say.

Notably, shares of Credit Suisse have plunged this week and the cost of insuring against the Swiss bank defaulting on its debts has soared. These movements suggest investors are increasingly concerned on the stability of the lender as it prepares to restructure its business.

Here’s what 6 experts said about market risk today:

1. Charlie McElligott, cross-asset macro strategist at Nomura

“The speed at which things are happening in the world…is obviously a ‘neon swan’ telling us that we are clearly now in the crash stage of the market,” McElligott said. told the Financial Times. He described the current dangers as glaring, compared to a “black swan” – a rare, unpredictable and impactful event.

The strong dollar is “causing enormous economic stress … and increasingly, metastasis in the markets,” McElligott added.

2. Michael Edwards, Associate Director of Investments at Weiss Multi-Strategy Advisers

“When financial conditions tighten this much, everyone is looking for who or what will be causing central banks to blink,” Edwards told the FT.

He said the Fed needed to tighten funding conditions to cool the buoyant U.S. economy, which means “someone will be hurt.”

3. George Goncalves, Head of US Macro Strategy at MUFG

“It’s a story of boiled lobsters,” Goncalves told the FT. “You put them in cold water and slowly increase the heat.

“That’s what’s happening in the markets, the Fed is mounting the pressure,” he continued. “But because the market is still abundant with liquidity, it is not yet clear where the weakness is.”

4. Cathie Wood, head of Ark Invest

“There are strains and strains in the financial system that I think have started to show,” Wood said. told CNBC tuesday. “We are experiencing a major financial shock.”

Wood highlighted the pain felt by the UK pensions industry when Yields on UK government bonds jumped last week, and soaring costs of insuring against the failure of the largest US banks.

5. Sheila Bair, former president of the Federal Deposit Insurance Corporation (FDIC)

“It’s worrying when a bank in market conditions like this says it’s restructuring, it’s going to sell assets, it’s going to raise capital,” she said of of Credit Suisse in a Interview with Fox Business Thursday. “I think it deserves very careful observation.”

Bair highlighted the dangers of derivatives, highlighted the interconnectedness of the banking system, and noted that there is always a big loser when something goes wrong.

“The complexity around these products, the fanciful financial engineering, whose bag is left?” she asked. “It was AIG last time, hopefully it won’t be Credit Suisse this time.”

She also urged the Fed to ensure the financial system remains stable as it proceeds with further rate hikes or it could cause a credit crunch that is hammering American consumers and businesses.

6. Bruce Kasman, head of economic research at JPMorgan Chase

The financial system is not particularly vulnerable today, as banks remain relatively healthy and most businesses have little need for funding, Kasman told the FT.

However, he noted that the US Treasury’s Financial Stress Index has hit a nearly two-year high, suggesting that higher rates and a stronger dollar are spreading stress in financial markets.

“Risks to global financial stability are an increasingly well-known unknown to the outlook,” Kasman said.

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Don F. Davis