Tomorrow marks the 10th anniversary of the financial crisis.
The International Monetary Fund has sent out a quick poll on Twitter today. Though there are still a few hours until the poll ends, it seems like the answer they’re getting isn’t exactly what they were looking for…
Former Fed Chair Janet Yellen has famously said that “there will not be another financial crisis in our lifetime” yet it seems that other analysts are pencilling one in for 2020. Further still, former governor of the Bank of England says that “we’re sleepwalking into the next crisis.”
Over the last decade, the governments and central banks of the world have done a great job of providing an abundance of new liquidity into the markets. However, some certainly feel like this has been overdone. At this point, if another downturn were to take place, the tools with which to deal with them have most likely been used up.
As an investor, the best strategy is usually one of cautious optimism. For the time being things are going great and there are many opportunities but the one thing I believe many have learned is to always be prepared for whatever may come.
Traditional Markets
In addition to all the predictions surrounding the ominous date mentioned above, one central banker is pointing to a very specific catalyst that he thinks could cause a 2008 like financial crisis.
Of course, this should be seen as a worst case scenario and not an apocalyptic prediction. Carney’s last major warning came before the Brexit referendum when he said that the Pound Sterling could fall sharply should the referendum pass.
Those warnings did, in fact, come to pass. The purple circle on this graph shows the night of the referendum and the Pound’s steep decline that day. The effect of which, in Carney’s view, will only be amplified should the UK leave without a deal.
