Finance
Next market crash: One word keeps popping up that should scare investors
Reuters / Kai Pfaffenbach
-
For months, one dirty word has been popping up across
Wall Street commentary. -
It relates to how difficult it’s become in certain
markets for investors to transact without distorting
prices. -
Red flags have been popping up in various asset classes
worldwide, and fortunately, Wall Street has some trade
recommendations to help investors get in front of
them.
What use is a killer trade idea if actually executing it is like
pulling teeth?
This is a question investors will likely have to start asking
themselves, if they haven’t already.
At the root of the issue is a dirty word that’s been showing up
in Wall Street commentary
with frighteningly increased regularity: liquidity.
For context, when these experts discuss the subject, they’re
referring to the lack of liquidity —
and the myriad problems created when investors are unable to
trade without distorting markets. When liquidity is constrained,
volatility increases. And when price swings get crazier, that’s
when huge losses happen.
And no matter where you look in the market, liquidity is
evaporating. This is especially true in the US, where Federal Reserve tightening
measures are quite literally siphoning off the supply of fresh
capital. As other global central banks look to end accommodation,
the situation will compound.
Examples all across the global marketplace
Perhaps the best recent example of low liquidity in action comes
courtesy of …
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