Disturbing Parallels

Taking the decision to reduce interest rates, the Federal reserve noted that growth in real gross domestic product was lower than a year earlier, and the economy there are negative effects, including “reverse curve” the yield on government bonds.

At the same time it was stressed that the risk of a recession is not present and the stock price peaked in July, then in August there was a correction, and in early September, growth of quotations has renewed.

This analysis was conducted, however, in the current situation, and in September 2007 when the situation was exactly the same as at present. Furthermore, even lower rates, the fed has taken on the same day — September 18.

Of course, all this in itself does not mean that current events will develop in the same way as then. The stock peaked in October 2007, and in November, Ben Bernanke, the then fed Chairman, reiterated at a meeting of the Committee of Congress that the risk of recession is no, although growth will be lower. And in December, the recession began.

Now the fed’s Jerome Powell says that growth will be moderate, and on its termination cannot be considered, as the situation on the labour market remains favourable, and inflation gradually increases. And yet, in order to be sure that the recession does not recur, the stock should reach a new high otherwise it is possible that the crisis in the stock market would affect everyone else.

Sven Henrich,

founder and chief market analyst NorthmanTrad
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