A crash in the stock market is a scenario that is certainly latent in the minds of many small and medium investors. It cannot be forgotten that in some cases equities have grown by around 80 %, as in the case of the United States. This fact has an impact on the development of a bearish scenario sooner rather than later, which may catch a large part of the clients who have their positions open in the equity markets off guard. It will therefore be very useful if we can have some of the keys on the initiation of these movements in the stock market.
Another aspect that is being considered these days by financial analysts is the possibility that a major recession occurs in the most industrialized countries of the world. This can lead to losses in the equity markets being very important for late taking positions. Even with the real possibility that we could lose up to half of the capital invested these days. This is a scenario that we must avoid above all other considerations. A big rise in the stock market is followed by a logical adjustment in the formation of its prices.
While on the other hand, we cannot forget that there are many of the securities listed on the equity markets that are clearly overbought. One of these examples is materialized by those in the electricity sector that have not stopped rising in recent months and have reached a value above their target prices. Being a very dangerous segment to open positions at this precise moment due to the strength of the rises in recent weeks. Where in these moments there is more what can be lost than gained.
Fall: business results
The next business results will be a perfect thermometer to gauge the real state of companies listed on the equity markets. Beyond other technical considerations and maybe also from the point of view of its fundamentals. To the point that some lousy business results they can be the trigger for possible falls in stock prices. Especially if they are below the expectations set by the financial markets. Therefore, there will be no choice but to be attentive to its evolution in the coming quarters.
On the other hand, it will also be very interesting to see what the reaction of listed companies will be to the lack of economic growth in the main powers of the world. Because in effect, the forecasts of the main international organizations (including the International Monetary Fund) go in this direction. With the arrival of an upcoming slowdown in the international economy. As a consequence, in the opinion of the IMF, Brexit and the economic problems in China. If their intensity is more pronounced, there is no doubt that these events would have a serious impact on equity markets around the world.
Advancement in the rate hike
Another relevant fact that could have very negative effects on stock markets around the world is that central banks of the European Union and the United States interest rates rise more in advance than initially anticipated. They would have a very negative effect on financial markets and with the real possibility that large falls could be experienced in international markets, even with collapses in the price of bank securities. Above other series of technical considerations and maybe also from the point of view of its fundamentals.
While on the other hand, this change in monetary policy, in these important geographical areas, would be very badly received by small and medium investors. Where selling pressure would prevail with crystal clarity on the buying current. That is, a loss of value in the shares of companies that are listed on the equity markets. And that could trigger a new crisis in these financial markets. Not surprisingly, we will have to be very attentive to what may happen these days to the issuing banks on both sides of the Atlantic. Because a lot of money is at stake from now on.
Puncture in the real estate sector
With regard to the Spanish equity market, the greatest danger may arise from the evolution of the real estate sector. One of the most important of the national economy and on which depends to some extent the Gross Domestic Product (GDP). In this sense, the risk of a new bubble in the sector reopens a new scenario in the Spanish stock market. Not only in the values of the brick sector, but also in the other remaining ones that also caught this situation that some analysts of the financial markets foresee.
While on the other hand, there is a small signal that is giving a slight signal about this situation and is the increase in the price of housing. Where the latest data show that a 100 square meter apartment in the luxurious Salamanca district of the capital of Spain has a average price around 700.000 euros. After an increase in the prices of these operations that is almost 10%. A fear that leads one to consider that this is a clearly overvalued market and that it could cause the much-feared real estate bubble.
Volatility in currency exchange
Although less important, a war in the exchange of currencies cannot be neglected. Where in recent days the euro had fallen towards the 1,12 dollar area and from that level, without having lost it at daily closing prices, it began to rebound. But showing some tensions in the exchange market and that can cause serious divergences between some of the holders of these national currencies. Although at the cost that speculators can obtain large capital gains in short-term operations, assuming certain risks in the operations that are going to be carried out.