Goldman Sachs warned about the current stock market levels in the US, highlighting that the Bull / Bear risk indicator of the bank is at the highest level for the past 10 years. The indicator is at levels that historically preceded the bear market. The reasons for the past were largely different from each other, but what, however, could cause the next crash market? There are two most likely scenarios that are worth looking at in terms of return on capital over the next 3 to 5 years:
1) Corrective movements in financial markets caused by rising interest rates and the ending of global quantitative easing programs or a sustained slowdown in growth. Such a bear market would be quite sharp, but it is a typical model where the recovery of companies' ratings is quick and is a prerequisite for a strong economic cycle afterwards.
2) Long period of relatively low return on financial assets. This would mean a period of low yield without a clear trend of stock indices.
Source: FxLive
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